Morning Report – Wednesday 28 April 2021

Jon Robson, Head of Trading

“Markets await two key updates today from the US Fed’s policy statement and Biden’s speech to Congress. Amid an accelerating economic recovery, Fed Chairman Jerome Powell is expected to repeat a dovish message which has previously reduced demand for the dollar.”

Main Headlines

As he nears the 100-day mark in his presidency, Joe Biden is tonight making his first address as president to a joint session of Congress. Building on the separate $2.3 trillion infrastructure programme, the President is expected to unveil a $1.8 trillion “American Families Plan.” Focusing on “human infrastructure”, the plan is expected to include $200 billion for free pre-school education, and additional spending for college education and paid medical leave. As the families plan is set to be funded by tax increases on high-earners, it is expected to face significant opposition in the Senate.

UK Minister Gerry Grimstone, the former Chair of Barclays and Standard Life Aberdeen, has revealed that the British government is in talks with sovereign wealth funds, including GIC, and pension funds about investment in green energy projects, such as “gigafactories” and offshore wind farms. The Government’s desire to secure investment in low-emission projects comes as the UK looks ahead to hosting the UN COP26 climate conference in November.

GBP

Sterling is weaker against most currencies overnight. Although allegations of “sleaze” and cronyism continue to dominate headlines, Conservative MPs have indicated that they do not anticipate the scandals having a significant impact in local and mayoral elections next week. This confidence is backed up by the Conservative double-digit lead in the polls, bolstered by the UK’s strong coronavirus vaccine rollout and the lifting of restrictions.

EUR

The euro is weaker against the dollar and stronger against the pound in the early morning trade. The French and German Finance Ministers, Bruno Le Maire and Olaf Scholz, yesterday held a joint conference to present plans for using their share of the €800 billion EU recovery fund, focusing on investment in priority areas such as tackling climate change and supporting digital development. As the EU’s economic recovery from the pandemic continues to lag behind other leading economies, Le Maire urged the European Union to speed up stimulus disbursements.

USD

The dollar is stronger against other majors this morning. The US Centers for Disease Control and Prevention (CDC) has released updated health advice indicating that fully vaccinated people no longer need to wear masks when conducting outdoor activities. The new advice comes as Biden heralded “stunning progress” in the fight against Covid-19, citing an 80% drop in deaths among senior citizens and a falling case numbers.

Markets

Asian stocks held tight ranges Wednesday and U.S. equity futures edged up as Treasuries steadied from overnight declines ahead of the Federal Reserve’s policy decision. Shares rose modestly in Japan, fell in South Korea and fluctuated in China. European and U.S. equity futures inched up as investors digested the latest earnings reports, after weakness in heavyweights like Tesla Inc. weighed on U.S. stock gauges. Treasuries held losses that sent benchmark 10-year yields back above 1.6%. A surge in commodities including copper and wheat paused but is fanning concerns about price pressures. Goldman Sachs Group Inc. analysts predicted commodities will extend their rally over the next six months as the global economy rebounds from the pandemic. West Texas Intermediate crude was steady and gold was lower.

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

8:45 a.m.: France April consumer confidence

11:00 a.m.: Italy sells bills, U.K. sells linkers

11:30 a.m.: Germany sells bonds

1:00 p.m.: Russia sells bonds

1:00 p.m.: ECB’s Rehn speaks

2:45 p.m.: ECB’s Schnabel Twitter Q&A

4:00 p.m.: ECB’s Lagarde speaks

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

8:00 p.m.: FOMC rate decision

8:30 p.m.: Fed’s Powell speaks

South Africa’s Ramaphosa testifies at inquiry into state corruption

Corporate Events

Earnings and sales updates include GlaxoSmithKline, Dassault Systemes, Delivery Hero, Puma, Sainsbury, Apple, Facebook, Qualcomm, Spotify, Shopify, Boeing, LG Chem, Hitachi, Mitsubishi Electric, Renesas, China Construction Bank, China Life, ZTE.

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