Morning Report – Tuesday 4 May

Jon Robson, Head of Trading

“The dollar’s monthlong decline has been interrupted, as more conditions come into place for the market to once again speculate the Fed might raise its administered interest rates earlier than anticipated. Participants are sharply eyeing upcoming economic data and policy speeches for clues. Elsewhere, the euro fell back slightly following yesterday’s rebound from its sharp retreat late last week.”

Main Headline

New York and neighbouring states New Jersey and Connecticut will lift most coronavirus-related restrictions on businesses by mid-May. Capacity restrictions on offices, theatres, museums and businesses including retailers, bars and gyms will be scrapped in the three states from May 19. This is the latest sign of how infections in the densely populated region, as well as the US more generally, have declined sharply. The number of daily Covid-19 cases hit a peak of about 95 per 100,000 people in New York on January 12 and has since fallen to a per capita rate of about 17.

On Monday, Boris Johnson indicated that Britons will be able to resume “some” international travel from May 17, as the European Commission announced plans to reopen the bloc to tourists who have been fully vaccinated. Ministers will meet this week to agree a limited “green list” of about a dozen countries that people can travel to without the need to isolate for 14 days on their return. They are expected to include Malta, Gibraltar, the Seychelles and Israel, with Portugal also likely to be among them. The list will be reviewed after three weeks.

GBP

Sterling is higher against most majors this morning. Britain and India have “fired the starting gun” on a full trade agreement, with the announcement on Tuesday of a preliminary deal worth £1 billion. Boris Johnson and Indian premier Narendra Modi have secured fresh cooperation and investments that will help create 6,500 jobs in the UK. They will unveil an enhanced trade partnership that includes £533 million of new Indian investment into Britain, focused on the health and technology sectors.

EUR

The euro is lower versus most major currencies overnight. The eurozone slid into a double-dip recession in the first three months of this year as output dropped 0.6 per cent under the weight of coronavirus lockdown measures. But EU factories are increasing production at a record rate to meet surging global demand, while German retail sales have rebounded more than expected. Yesterday Denmark became the first country to drop the Johnson & Johnson Covid-19 shot from its vaccination programme owing to blood clot concerns.

USD

The dollar is offered against most majors in early morning trade. U.S. manufacturing activity grew at a slower pace in April, restrained by shortages of inputs as rising vaccinations against COVID-19 and massive fiscal stimulus unleashed pent-up demand. Meanwhile, the Treasury Department plans to borrow nearly $1.3 trillion over the next two quarters as federal spending picks up following the Covid-19 relief package enacted in March.

Markets

U.S. equity futures retreated and Asian stocks were mixed Tuesday following weakness among the technology giants on Wall Street. Shares rose in Hong Kong, Australia and South Korea. Taiwan’s benchmark pared intraday losses as steep as 3.3%, with investors trimming risk after the index beat all major global peers in April. Japan and China were among markets closed for holidays. U.S. contracts fell after the S&P 500 ended near session lows and shares such as Tesla Inc. and Amazon.com Inc. weighed on the Nasdaq 100. European futures fluctuated. Ten-year Treasury yields dropped back to around 1.6% in U.S. trade amid comments from Federal Reserve Chair Jerome Powell that the economic recovery is patchy. A gauge of commodity prices is at the highest level since 2012. Silver and gold gave up some of their earlier advance, while oil held gains of more than 1%.

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

6:15 a.m.: Saudi Arabia, UAE April IHS Markit PMI

8:00 a.m.: Russia April manufacturing PMI

10:00 a.m.: ECB’s Villeroy speaks

10:30 a.m.: U.K. March mortgage approvals, April manufacturing PMI

10:30 a.m.: Spain sells bills

11:30 a.m.: Germany sells linkers

12:30 p.m.: ESM sells bills

Madrid local elections

G-7 foreign and development ministers meet in London

Boris Johnson to hold a virtual Summit with Narendra Modi

Deadline for Israel’s Netanyahu to form government

Bloomberg Wealth Summit

Corporate Events

Earnings include Aramco, Ferrari, Vonovia, Pfizer, T-Mobile, CVS

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