Morning Report – Thursday 1 April

Jon Robson, Head of Trading

“The reveal of Biden’s infrastructure plan sent the dollar to a multi-month high as market participants bet fiscal stimulus – coupled with aggressive vaccinations – will help the US grow faster than other economies. While currency trading is expected to slow towards the Easter holidays, the dollar could gain further if the findings in today’s manufacturing survey and Friday’s job data exceed expectations.”

Main Headlines

Joe Biden unveiled his plan to plough $2tn in government spending into US infrastructure as the first stage of a multitrillion-dollar effort to reshape the world’s largest economy. In an address setting out his vision, Biden defended the proposal to raise that amount by taxing large companies and wealthy Americans, telling them it was time to pay their fair share. The plan is being pitched as a way to boost the economy without overheating by lifting productivity. Democrats are aiming for House passage by July, even as Republicans will probably reject the plan outright.

U.K. businesses saw their financial position worsen in the first quarter as the third major lockdown in a year took its toll on an already weakened economy. A survey by the British Chambers of Commerce found 41% of firms saying their cash flows deteriorated in the three months through March, while one in five reported an improvement. The situation was worst for hotels and catering companies, which have mostly been closed since early January. Eight out of 10 businesses in that sector reported a downturn in their finances.

GBP

Sterling is lower against major currencies this morning. A senior Brussels policymaker has sought to quash British hopes of obtaining AstraZeneca vaccines manufactured in the EU, saying “zero” jabs would be shipped across the Channel if the company failed to meet its commitments to the bloc.   Today ministers will hammer out a framework for reopening Britain’s overseas travel sector, as chancellor Rishi Sunak insisted the country was “in a good position to recover strongly” from the Covid-19 crisis.

EUR

The euro is lower versus the dollar and higher against the pound overnight. Emmanuel Macron announced a nationwide four-week lockdown, closing French schools and business, in the latest and alarming sign that Europe is yet again losing control of the pandemic. On the other hand, Hungary is poised to ease lockdowns from Monday after PM Viktor Orban declared that lockdowns can’t stop the pandemic’s spread. Hungary reported record daily deaths yesterday.

USD

The dollar is higher against most majors in the early morning trade. Johnson & Johnson said one batch of the main ingredient for its new Covid-19 vaccine didn’t meet quality standards at a contract manufacturer, and the doses weren’t distributed. Meanwhile, New York became the 16^th state to legalise cannabis after years of disagreement over how to regulate its sale and distribution.

Markets

A gauge of Asia-Pacific shares was set for its first climb in three days, with Hong Kong leading gains, after data signaled a pick-up in regional manufacturing. S&P 500, Nasdaq 100 and European futures edged higher. The tech-heavy U.S. index rallied overnight, outperforming the S&P 500. Ten-year Treasury yields dipped after the worst quarterly performance since 1980 for the Bloomberg Barclays index tracking U.S. government bonds. Oil gained ahead of a high-stakes OPEC+ meeting on supply curbs. Australia’s currency fell to the lowest point this year. Gold was higher.

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

8:00 a.m.: Germany Feb. Retail Sales

8:00 a.m.: Russia March Manufacturing PMI

9:00 a.m.: Turkey March Manufacturing PMI

9:15 a.m.: Spain March Manufacturing PMI

9:45 a.m.: Italy March Manufacturing PMI

9:50 a.m.: France March Manufacturing PMI

9:55 a.m.: Germany March Manufacturing PMI

10:00 a.m.: Euro-Area March Manufacturing PMI

10:30 a.m.: U.K. March Manufacturing PMI

12:00 p.m.: U.K. sells bills

2:30 p.m.: U.S. Initial Jobless Claims

6:00 p.m.: Russia 4Q, 2020 GDP

7:00 p.m.: Baker Hughes U.S. Rig Count

OPEC+ meets to discuss production levels for May

Corporate Events

Earnings include Next, Sodexo

Evergreen holds annual investor meeting

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