With the dust on the potential fall-out of the Archegos saga settling and the Suez Canal reopening, global markets could leave these side-stories behind and return to ‘business as usual’. The latter these days still means assessing the progress of the vaccinations and the impact of upcoming (US) fiscal stimulus. The vaccination headlines recently were unequivocally positive with good news on the efficacity of the Pfizer and Moderna shots and President Biden bringing forward the timing of widespread vaccinations. The refocus on the ‘return to normality’ unlocked interest rate markets out of recent their recent pause. (US) yields resume their uptrend with the belly of the curve rising most (3.8 bp for 5-y and 4.5 bp for 10-y). 5 and 10-y yields also touched new post-corona highs respectively at 0.945% and 1.77%. Interestingly, Bunds also joined today’s repositioning on global interest rate markets, even slightly underperforming US Treasuries. Despite much slower vaccinations, EMU eco data also continue to print stronger than expected. The EC economic confidence jumped from 93.40 to 101.0, with both industrial and services confidence improving above expectations, indicating ongoing resilience of the economy despite a less bright current picture on the pandemic. Expectations for a (short-term, temporary?) uptick in EMU inflation also materialized as German Harmonized CPI jumped from 1.6% to 2.0%. German yields are rising between 1.9 bp (2-y) and 4.25 bp (10-y). 10-y Intra-EMU spreads are mixed/little changed with Italy slightly underperforming (+2 bp). Italy today sold €8.5 bln bond a different maturities. Reflationary spirits also supported EMU equity markets, gaining about 0.5% and setting now cycle peaks. The rise in yields and markets pondering the impact of higher taxes to fund stimulus to some extent cap the US equity performance, especially for tech stocks. US equities opened lower, with the Nasdaq currently losing 0.85% but with the S&P and Dow still within reach of record levels. Oil stabilizes in the $64 p/b area as markets look forward to the outcome of the OPEC+ meeting later this week.
The resumption of the reflation/normalization trade until now doesn’t change established dynamic in FX. Even as US/EMU interest rate differentials didn’t widen and with constructive EMU data, it didn’t hamper the USD outperformance (and euro underperformance). EUR/USD hardly showed any reaction to the data extending its downtrend (currently 1.1725 area). The trade-weighted-dollar (DXY) regained the 93 big figure (93.17). USD/JPY cleared the 110 barrier (currently 110.35). Sterling is holding strong against a struggling euro, but the EUR/GBP pair today didn’t touch a new correction low. However, at 0.8536, downside momentum remains perfectly intact. The Turkish lira this morning declined further after the replacement of deputy governor Cetinkaya, but changed course as governor Kavcioglu pledged to keep a tight monetary policy stance and indicated that the CBTR intends to keep the one-week repo rate above consumer inflation. EUR/TRY eased back to the 9.76 area but still trades with a daily loss.
Germany will again reassess Astra-Zeneca’s vaccine after its capital Berlin suspended its use for people under the age of 60, citing new data on potential side effects. New recommendations from the Germany’s vaccine commissions could come already today. Earlier this month, several countries including Germany stopped inoculating with the vaccine after reports of blood clots in some recipients. The EU’s drug authority later reaffirmed the vaccine was safe.
Also in Germany, the largest trade union IG Metall, secured a 2.3% wage increase in the state of North Rhine-Westphalia. The increase can be paid either in full or as part of a switch to a four-day week. There will also be a one-off coronavirus premium of 500 euros. Deals agreed in the industrial-heavy and populated region are traditionally used as a template for agreements across the country.