Markets
European traders put comfort from this morning’s constructive Asian sentiment though mood was a little less ebullient. German ZEW investor sentiment beat consensus with the expectations component jumping from 55 to 61.8 in January. The current conditions subseries remains deep in negative territory but surprised on the upside after showing a marginal rise from December to -66.4 while a further decline was expected. EMU stocks opened about 0.6% higher (EuroStoxx50) before cutting gains to trade more or less flat going into US dealings. Wall Street rises about 1% (Nasdaq) after a long weekend. Core bonds traded heavy with USTs underperforming in a catch-up move in the run-up to the new US Treasury Secretary Yellen’s confirmation hearing later today where she is expected to promote Biden’s fiscal stimulus plans and reaffirm the US’ commitment to a market-driven currency valuation. Advancing oil prices after a few days of struggling added to the move. Brent oil retakes $55/barrel. The US yield curve bear steepens with yields up to 2.6 bps (10-yr) higher. German yields rise about 1.5 bps at the long end of the curve. In launching a new 50y bond, France lured a record demand. Investor appetite for the bond priced at OAT+7 (compared to initial guidance of OAT+9 area) amounted up to more than 75 billion euro of which the country plans to tap €7bn. The French yield curve marginally bear steepens with yields up less than 1bp at the long end. Peripheral spreads tighten with Italy (-3bps) outperforming even as the government awaits a confidence vote in the Senate later today.
After a calm start of the week, the dollar finds itself cornered again, losing to all major peers barring the yen. EUR/USD took out 1.21 during early European dealings after which a technical acceleration pushed the pair further north to trade around 1.213 at the time of writing. After failing to take out 91, the trade-weighted dollar (DXY) recovery slowed already yesterday and reversed today. DXY changes hands around 90.45, down from 90.76. USD/JPY is one of the few dollar pairs eking out a gain. The duo is filling bids at 103.91, slightly up from 103.7, giving up however on the 104 temporarily captured this morning. EUR/GBP trading was a copy paste of EUR/USD. Sterling initially hovered close to the key support area sub 0.89, supported by healthy overall risk appetite before eventually snapping. EUR/GBP ventures north of 0.89(2). Cable manages to eke out gains thanks to a softer dollar. GBP/USD rises marginally beyond 1.36.
News Headlines
According to sources, the US Treasury is pressuring large lenders to restart the Federal pandemic loan program PPP (Paycheck Protection Program) as it reopens on Tuesday. However, due to changes to the rules and to government technology, some of the participants warn on unresolved issues still complicating the start of the program. Under the PPP program, lenders make loans that can be repaid by the government if borrowers spend the cash on eligible costs. Congress approved an amount of $284 bln of additional loans to help small businesses to cope as the ongoing impact of the pandemic continued to affect business.
According the Monthly Report of the International Energy Agency (IEA) the recovery in oil demand will take a hit from the spike in corona vicus cases. According to Paris-based Agency, the improvement in demand reversed from December on. IEA lowered its demand forecast for the first quarter by 580 000 bpd and its expectations for 2021 by 300 000 bpd. Efforts by producers to balance demand and supply helped to limit output and contributed to lower stockpiles of crude oil and oil products, but oil stocks remain close to the May peak.
