Morning Report

Morning Report – Wednesday 24 Februar

Jon Robson, Head of Trading

“Jerome Powell has reaffirmed the Fed’s dovish bias, indicating that it is not considering tapering asset purchases. The improvements in U.S. and global growth prospects are consistent with a downtrend in counter-cyclical dollar.”

Main Headlines

Federal Reserve chairman Jerome Powell has told the US Senate banking committee that there is “hope for a return to more normal conditions” this year but signalled that the central bank intended to maintain its heavy support to the economy. He also played down concerns of an inflationary outbreak from another big fiscal stimulus package or from an unleashing of pent-up demand as a growing number of Americans are vaccinated against the virus. Powell called the recent run-up in bond yields that has unsettled the stock market “a statement of confidence” in a robust economic outlook.

Schools in England will be allocated a further £400m to help pupils catch up on lost learning, as the government announces plans for a long-term programme of recovery that will begin when children return on March 8. The package, which is in addition to £1bn announced in June and £300m in January, would give teachers the resources to “give children the opportunities they deserve”, said the UK Prime Minister Boris Johnson.


The pound continues to soar, making fresh multi year highs overnight. U.K. Chancellor of the Exchequer Rishi Sunak has punted a decision on what rules will govern his tax and spending decisions until the Fall. Ahead of his Budget next week, what’s clear is that the coronavirus is wreaking havoc on the economy and the priority is to buttress jobs. Sunak promised a review of the fiscal framework in his first budget last March, saying he would consult “widely with a range of experts” before reporting back in the fall.


The euro made slight gains against the dollar but is weaker against sterling this morning. European manufacturers are passing higher input costs on to their customers as shortages of materials and soaring shipping costs disrupt supply chains. Meanwhile, Germany’s economy performed better than expected at the end of 2020, growing 0.3% as stronger investment and exports offset a drop in consumer and government spending.


The dollar is lower against most majors overnight. The Biden administration is readying sanctions and other measures to punish Russia over a cyber espionage campaign as the Senate heard that hackers potentially used a dozen different ways to infiltrate at least nine federal agencies and about 100 companies since 2019. The sanctions and package of other measures are aimed at securing commercial networks and improving third-party systems.


Stocks fell with U.S. and European futures this morning as investors balanced the risk of stronger inflation driving global rates higher against the Federal Reserve’s pledge of continued policy support. A gauge of Asian shares slid the most in almost a month, with Hong Kong equities tumbling on the city’s plan to raise stamp duty on stock trading for the first time since 1993. Chinese gauges retreated for a third day. The S&P 500 Index reversed losses Tuesday to close in the green following Fed Chair Jerome Powell’s message that the central bank was nowhere close to unwinding its easy policy. Cyclicals outperformed, while the tech heavy Nasdaq 100 closed lower despite a late rally. Ten-year Treasury yields held just below the one-year high reached Monday. Oil declined after an industry report pointed to the first gain in U.S. crude stockpiles in five weeks. Gold was up 0.1% at $1,807.35 an ounce.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: Germany 4Q F GDP

8:45 a.m.: France Feb. Manufacturing Confidence

10:00 a.m.: Austria Feb. Manufacturing PMI

11:00 a.m.: Italy, Sweden, Greece sell debt

11:30 a.m.: Germany sells bonds

1:00 p.m.: BOE’s Haldane Speaks

3:30 p.m.: BOE’s Bailey and other policymakers testify before Parliament’s Treasury Committee

5:00 p.m.: Russia weekly CPI

Corporate Events

Earnings include Iberdrola, Reckitt Benckiser, Lloyds Banking, Endesa, Worldline, Puma, EDP, Nvidia, ViacomCBS, L Brands, Petrobras

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