Morning Report – Wednesday 21 April

Jon Robson, Head of Trading

“Declines in the dollar this month come as evidence mounts that the Fed would be slower in tightening monetary policy than the market had expected. Meanwhile, there has been some encouragement for the euro since EU announced it had secured an additional 100 million doses of the BioNTech and Pfizer vaccines. Elsewhere though, pandemic developments are triggering investor caution.”

Main Headlines

A jury has convicted former Minneapolis police officer Derek Chauvin of murdering George Floyd, whose death last year set off worldwide protests against racial injustice. Chauvin, was found guilty on all three charges. The trial in Minneapolis has been one of the most closely watched US court cases in years and came at a time of calls for greater accountability after police kill people of colour while performing their duties. Xi Jinping has called for a new world order, launching a veiled attack against US global leadership and warning against an economic decoupling of the two superpowers. International affairs should be handled by everyone,” the Chinese president told the Boao Forum for Asia, an event billed as the country’s answer to the WEF in Davos.

Leading English football clubs have pulled out of the European Super League, in effect killing off the breakaway competition after rival teams, managers, players, fans and politicians united in opposition to the contentious plans. The co-ordinated moves came after a day of frantic behind-the-scenes discussions at the Super League clubs following international condemnation over their involvement in a project that threatened to overturn the hierarchy of the world’s favourite sport. The Resolution Foundation’s research shows that UK households have suffered a bigger income shock during the Covid-19 crisis than their French and German counterparts, and are more likely to have run up debts, highlighting the inadequacy of the UK’s welfare safety net.

GBP

Sterling is lower against the euro and well bid against the dollar in the early morning trade. Many UK businesses reported better than expected trading last week as they reopened after 3 months of lockdown, as unofficial measures of economic activity suggested strong, pent-up consumer demand. Economists said the preliminary data showed the reopening was “going as well [as] could have been hoped”, confirming their forecasts of a strong rebound in the second quarter. Consumers’ incomes were largely protected by the government furlough scheme during the slump in output in 2020, and data tracking shop visits, restaurant bookings and bank transactions showed that households were eager to spend when stores, bars, pubs, outdoor entertainment and many other businesses reopened on April 12.

EUR

The euro is weaker than most majors overnight. Uber is attempting to break what it called Just Eat Takeaway.com’s “monopolistic” stranglehold on the German food delivery market, in the biggest test yet for the company’s use of employed couriers instead of gig workers for meal conveyance. Uber Eats will launch in Germany for the first time over the next few weeks,  in its biggest entry to a new country since 2018. Pierre-Dimitri Gore-Coty, Uber’s senior vice-president of delivery said that Germany was one of its fastest-growing markets in ride-hailing, which it operates in 13 cities, and a “strategically important country” as it strives for group profitability for the first time this year.

USD

The dollar is slightly higher overnight. Tobacco stocks have taken a hit on reports that Joe Biden’s administration is considering forcing companies to strip cigarettes of nicotine and imposing a ban on menthol products in the US. The proposals, which have been around for years, have resurfaced as the FDA faces an April 29 deadline to respond to a citizens’ petition to ban menthol cigarettes, which make up roughly a third of sales in the country. Tobacco groups have been racing to gain market share in vaping and non-combustible heated tobacco products, as public health campaigns in western countries continue to suppress cigarette sales.

Markets

Asian stocks tumbled and U.S. futures declined Wednesday as rising virus cases around the world led to renewed concern about their economic impact. Treasuries held overnight gains. An MSCI Inc. gauge of Asia-Pacific shares was on track for its biggest drop in four weeks with Japan and Hong Kong leading. Nasdaq 100 futures underperformed. S&P 500 contracts fell after the benchmark dropped for a second day, extending its slide from an all-time high, with investors showing caution ahead of the brunt of the earnings season. Treasuries held a rally that sent the 10-year yield to its lowest level in more than five weeks. The dollar edged higher. Oil prices retreated. Gold was at $1,786.34 an ounce, up 0.4%.

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

8:00 a.m.: U.K. March CPI, RPI, PPI

10:05 a.m.: BOE’s Ramsden speaks

10:30 a.m.: U.K. Feb. House Price Index

11:00 a.m.: U.K. sells bonds

11:30 a.m.: Germany sells bonds

12:30 p.m.: BOE’s Bailey speaks

4:30 p.m.: EIA Crude Oil Inventory Report

Russia’s Putin makes annual address to the nation

Corporate Events

Earnings and sales updates include ASML, Roche, Heineken, Carrefour, Ericsson, Verizon, NextEra Energy, Anthem, Las Vegas Sands, Chipotle, First Abu Dhabi Bank, Sartorius Stedim Biotech, Sartorius AG, Deutsche Boerse, Akzo Nobel

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