Morning Report – Tuesday 27 April

Jon Robson, Head of Trading

“The dollar is losing ground daily, weighed by subdued Treasury yields ahead of the Federal Reserve’s policy decision this week. Meanwhile, global equities have started the week hitting record highs, amid increasing investor confidence in a rapid global recovery, further reducing demand for safe haven assets.”

Main Headlines

The US President’s top economic adviser has said there was no evidence that raising capital gains taxes would hurt long-term investment, as the White House geared up for a long political fight over plans to impose higher levies on the wealthy to fund a massive increase in spending. Brian Deese, director of the National Economic Council, said that there was “no correlation” between capital gains tax rates and investment or overall US economic growth over the past 30 or 40 years. The US will send up to 60m doses of the AstraZeneca vaccine overseas – ready to ship within weeks – as the Biden administration comes under pressure to assist countries suffering a resurgence of the virus.

The City of London is planning to convert offices left vacant after the pandemic into new homes as part of a recovery strategy to be launched by the UK capital’s financial district. It will publish proposals to boost its cultural and creative industries, as well as bringing in “high-potential tech-led businesses” not traditionally attracted to its medieval streets. Recep Tayyip Erdogan said troubled relations between Turkey and the US had sunk to a new low after Joe Biden formally recognised that Armenians suffered a genocide a century ago in lands that are now in Turkey.

GBP

Sterling is unchanged overnight. Lex Greensill, the financier who secured a place at the centre of the UK government, acquired his privileged role without any contract or explanation of his job, two senior Whitehall officials revealed. Greensill carried a business card describing himself as a “senior adviser” to the prime minister’s office. Simon Case, head of the UK civil service, told MPs he was “alarmed” that Greensill, who led the recently collapsed finance company Greensill Capital, was handed an advisory role and a desk in the Cabinet Office.

EUR

The euro is lower versus the dollar overnight. Polish media group Agora has called on the EU’s competition supremo to speak out against the “unjustifiable” blocking of its deal to take over rival Eurozet as concern grows over press freedom in the central European country. Agora, the publisher of Gazeta Wyborcza, one of Poland’s largest daily newspapers and a fierce critic of the government , bought a 40% stake in the radio group Eurozet in February 2019 and applied for permission to buy the remaining 60% later that year. But the country’s competition authority argued that the transaction would restrict competition and blocked the move in January this year.

USD

The dollar is higher versus most majors this morning. Consumers have been put on notice to expect higher prices for goods ranging from toilet paper to washing machines to restaurant burritos, in a number of recent announcements that underline inflationary pressures across the global economy. Price rises have emerged as a dominant theme in the quarterly earnings season which kicked off in the US this month. Executives at Coca-Cola, Chipotle and Whirlpool, as well as other household brands told analysts in earnings calls last week that they were preparing to raise prices to offset rising input costs, particularly of commodities.

Markets

Stocks pared losses Tuesday as some robust first-quarter earnings offset concerns about the risks to growth from spiking Covid-19 cases in parts of the globe. An Asia-Pacific share gauge came off earlier lows but remained on course to snap a three-day climb. Japan underperformed as pandemic-related curbs weighed on sentiment and the central bank cut its inflation forecast. Shares in Hong Kong rallied as HSBC Holdings Plc reported earnings more than doubled in the first quarter and the lender returned to profit in Europe and the U.S. European futures were flat, while U.S. contracts climbed after solid corporate earnings helped the S&P 500 Index to a record. Gold was at $1,782.12 an ounce.

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

9:30 a.m.: Riksbank rate decision, Sweden March unemployment rate

10:00 a.m.: Italy April consumer confidence

11:00 a.m.: Italy sells bonds, linkers

11:30 a.m.: Germany sells bonds

12:00 p.m.: France 1Q total jobseekers

12:00 p.m.: U.K. April CBI retail sales

12:00 p.m.: ECB’s de Cos speaks

2:00 p.m.: Hungary rate decision

U.K.’s Sunak takes questions in Parliament

UN hosts reunification talks for Cyprus in Geneva, which run through Thursday.

Corporate Events

Earnings include Novartis, Atlas Copco, ABB, DSV Panalpina, Evolution Gaming, Swedbank, Microsoft, Alphabet, Eli Lilly, TI, UPS, Amgen, Starbucks, Raytheon, GE, 3M, Chubb

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