Market movers today
Fed chair Powell and Treasury Secretary Yellen will make their first joint appearance before the US House Financial Services committee to testify on Fed and Treasury pandemic policies. Fed’s Bullard and Williams will also be on the wires and markets will naturally look out for any hints on future Fed policy directions on a day which is otherwise quiet in terms of data releases.
The 60 second overview
ECB: The ECB finally delivered on its promise to boost the pace of PEPP buying to combat the threat of undue tightening of financial conditions. Net purchases climbed by EUR 21.1bn, the most since the start of December. The more important gross figure is released today at 15:00 CET, where we could see a number up to EUR 24bn.
Global Macro: This morning we sent out an update of our global macro views, see Big Picture Update – Divergent fortunes. We have raised our global GDP outlook and now look for growth among G4 (US, China, Euro area and Japan) at a strong 7.2%, higher than consensus at 6.2%. US is the key driver behind our upward revision as the fiscal stimulus and speedy vaccination roll-out is boosting growth there with positive spill-over to the rest of the world. Being ahead in the post-covid recovery, China is the only G4 country where we see slowing growth during 2021.
Germany: At yesterday’s summit with state premiers, Chancellor Angela Merkel agreed to prolong Germany’s Covid-19 lockdown until 18 April amid a rising caseload and sluggish vaccination roll-out. All stores (except supermarkets) will be closed from April 1 for five days over Easter to try and reverse the third wave. To help mitigate the impact of the coronavirus crisis, the finance ministry also now plans to borrow over EUR 60bn more debt than initially foreseen this year. With restrictions having been in place more or less since November, growing resentment in the public about the lack of strategy and a range of scandals involving MPs increasingly spell trouble for the ruling CDU/CSU party, with poll ratings tumbling ahead of the September general elections.
Equities: Global equities rose yesterday lifted by US large cap and growth stocks. Relatively big diverges across styles, factors and sectors once again with lower bond yields as the driving factor. In the US, Dow +0.3%, S&P 500 +0.7%, Nasdaq +1.2%, Russell 2000 -0.9%. This morning Asian stocks continue their underperformance as Western sanctions pressure Chinse stocks. Japanese carmakers are in a little comeback following Monday’s weakness after Renesas’ chip shortage news. Chip shortage is becoming a bigger and bigger issue also for Nordic companies and will probably be a big theme in the Q1 reports due in a month’s time. Futures in Europe and the US are slightly negative this morning.
FI: The final full week of the quarter got off to a slow start. The ECB’s PEPP net figure which gave the first indication of what ‘significant’ meant was EUR21.1bn. The more important gross figure is released today at 15:00 CET, where we could see a number up to EUR24bn. Intra euro area spreads were marginally wider alongside German Bund ASW spread 1bp wider. The bull flattening of the curves happened despite Finance Minister Scholz saying that new borrowing would be lifted to EUR240bn, which is EUR60bn more than initially planned.
FX: GBP is weakening as talks centre on EU-UK vaccine export bans and this pose a tail risk for further unwind of Sterling strength. Lira sell-off remains contained vis-à-vis broad asset classes. For USD/TRY, we see a 3M forecast in the 8.00-8.50 area.
Credit: The roll of iTraxx made yesterday appear like a strong risk-off day while the underlying tone was much stronger. The new iTraxx Xover (Series35) closed in 272bp (+28bp), but the old (Series 34) index finished the day 4bp tighter tha
