Biden Unveils $2trl Infrastructure Plan And Big Corporate Tax Rises

Okay, very good morning. It is the 1st of April, so welcome to a new month, a new quarter. And just a reminder, we have the Amplify Market Watch podcast. It's going to go out on Friday as per normal. Piers and I will record that. So despite the kind of market closure, public holiday, we'll do our best to get that out to you tomorrow morning. So don't forget to just search and subscribe for Market Watch by Amplify Live on Spotify, Apple, Google, and so on and so forth. So do check that out if you haven't already done so. Otherwise, let's get straight into it and start talking about what's going on in markets this morning. And I guess we've got to start chronologically with the close on Wall Street before we then review the market sentiment here at the European Open. And so just a quick look at the S&P 500 heatmap, and as you can see, mega-cap tech names outperforming the dominant squares here. The largest market cap names firmly into the green. Saw the Nasdaq outperform. Nasdaq 100 up around 1.5%, the Dow actually negative a quarter, the S&P up about a third of 1%. Um, so one of the ones I just wanted to, to comment on briefly here was Microsoft. Um, wasn't the star performer, uh, outperformance likes of Tesla up about 5%, um, in likes Facebook were up around 2.25%, but Microsoft did see, uh, catch a late bid. So I just wanted to comment on what's a pretty cool picture really, and, uh, and obviously a big deal for Microsoft because it came out last night that they have signed a deal with the US Army for augmented reality headsets. Based on its Halo Lens, as you can see here, products, and backed by the Azure cloud computing services. The contract could be up to nearly $22 billion over a 10-year period. And what this headset allows then the Army to do is help train soldiers, essentially helps them hone in on targets and be aware of nearby threats by overlaying contextual information on the real world in an augmented reality. So yeah, um, pretty cool stuff. Uh, just I'd mention that. And yeah, late, late lift in MSFT shares at the end of the session. In terms of the overnight session, um, the Asia session kind of followed on from the general positive handover from, from the US. We also had Biden's speech, of course, and he came out and unveiled he is going to put $2 trillion in government spending into infrastructure Alongside though, $2 trillion in higher corporate taxes. Um, on that point, uh, Biden wants to raise corporate tax from 21% to 28%, so meaningful jump higher, but a figure of 28% that we have heard before, so not massively surprising. Um, that— and he wants to muster though additional revenue through a 21% global minimum tax calculated by a country-by-country basis. So it hits profits in tax havens is what the White House are trying to obtain. So on the FT article, for those interested, it kind of breaks it down, the spending. Obviously, this is the first part of two, this one more focused on kind of domestic infrastructure. So transportation infrastructure, manufacturing subsidies, so on and so forth, how they're going to spend and how they're going to generate the revenue. And one of those revenues The biggest one, of course, corporate tax increases. But also in there is some other things like end of fossil fuel tax breaks and anti-inversion measures, for example. So it could be quite interesting on the sector reactions to some of these. Overall though, I'd say generally nothing too shocking here, but it's quite a meaty speech with lots of little nuances to it. So probably need a bit of time to chew it over in terms of the details. But markets for the open this morning, from a sentiment perspective, obviously have quite liked what they've heard. We remain up and around the higher levels in equity indices. I was just looking at the DAX a moment ago before I came on, and I mean, look at the DAX for the week. Just pretty much one-way traffic that we've been trading since the 25th. So super impressive there, having, having broken through 15,000, of course, in the DAX future. The NASDAQ technically coming back to an interesting area of the kind of triple top that we saw on 22nd through to the 24th of the month of March. Retest that was seen right around the close yesterday in US trade failed to break, but we're right back up there in close proximity of it again. For the NASDAQ, and the S&P likewise seemingly on its, on its way to the 4,000s. It feels a bit inevitable at this point in time. Other assets, gold obviously saw really nice bounce, just pulling off some of the pressure that it was seeing of late. And so we've managed to recover up to a point of just finding some near-term resistance here. You can see on the third test at around 17.15 and a half here in the futures, uh, after a nice about-turn with some of the pullback in the dollar that we saw yesterday. But one thing with that, the dollar is, um, in a bit of a recovery mode at the moment in terms of the Asia-Pac session. Trades up the Dixie about 1/10 this morning. So both major pairs seen a touch lower. One currency pair I did want to mention was the Aussie dollar. You remember I was talking about the Aussie dollar on the Amplify Live feed, um, last week, and it was a video we shared with our YouTube community. But the Aussie is just breaking down a little bit in the overnight session. And on the daily chart, technically, we've had quite, quite a significant break of, of that low that we were seeing back in late February. And the breakdown of that price has just led to a bit of an extension with some of the, the recovery from yesterday's losses in the dollar, uh, in the Dixie. So, um, continues to trade firmly below now, um, the 100 DMA line, which is the blue line, and does open up technically room for a bit of downside here. And just to recap, we were looking at the Kiwi dollar as the litmus test on the break of the 100 DMA with the same structure to the Feb and kind of March lows. And when that broke, it traded very heavy quite quickly. Interestingly, now the Aussie— the Kiwi, excuse me— has found on the pullback from that initial flush lower we saw at the end of March some resistance around the 70 psychological handle, which was the floor to price in the period of consolidation through November, December. And we're just knocking on the door again of that low that we had on the 25th of March. So any, any further dollar strength, be looking for a continuation and maybe a bit of further momentum on the break through that technical low. And that would certainly help then further downside in sympathy with that move then with the Aussie. With the Aussie, uh, probably looking down, you've got the 75 psychological, then 74.71 was the low that we had on the 21st of Dec, and then lower down, more aggressive target of 74.05 would be the high that we had from late August, um, of last year and then early part of December. So, so worth keeping an eye on that as that starts to play out now with some Aussie prevailing weakness and some nice technicals being taken out. Oil prices, we'll talk a little bit about OPEC in a moment. Pretty quiet really. We had a bit of a breakdown in price seen late yesterday Found a bit of a floor at the moment around the $59 handle. So really just awaiting now, uh, what the latest outcome is and confirmation of the rollover of the supply pact as expected for May from OPEC+ today. Um, a couple of other points then from the news. Overnight we did have the latest Caixin market manufacturing PMI from China. Um, so this is the Caixin reading. So rather than the state reading we had earlier in the week, which is looking at more state-led and larger corporations. This is more smaller firms, and it dropped to 50.6 last month, the lowest reading actually since April of 2020, and below expectations of 51.3. Not really a great deal of reaction to that. Local indices generally trading with a more positive tone, just following the overall macro kind of trend at the moment. The other thing you might have read about is that France are heading into a month-long lockdown. It was announced by President Macron last night. They're going to close schools and businesses starting from Saturday. Italy has joined Germany as well, extending their partial shutdowns well into April, with Draghi saying that current restrictions and movement on business openings in high-risk areas will remain in place until the end of April. I was just having a look at, you know, it's a really fantastic website for tracking all things COVID which I'm sure most of you will already be using, but if you're not, it's called Our World in Data. And there is something that they've compiled called a stringency, stringency index. And what that basically is, is a composite measure based on 9 response indicators, including things like school closures, workplace closures, travel bans, so on and so forth. And from that, it can be rescaled to a value of between 0 and 100. 100 being the most strict restrictions and the most loose being 0. And this is just kind of focusing in the map on, on Europe. And as you can see here, this is going to obviously become more deeper blue for France as they step up now to more aggressive restrictions in place for a month. But you can see Italy on the index at 84.26, one of the highest actually in the eurozone. Greece at 87.96, the UK at 70, 76. So interestingly, overlaying kind of COVID case rates, we've obviously been seeing that re-emerge in the likes of France, Italy, and other places in mainland Europe and Germany. However, the UK's had a relative, by comparison, high level of, of stringency index ranking, if you like, compared to its European peers. Irrespective of the fact that COVID cases have remained fairly low in comparative terms. So just goes to show the quite stark difference there in strategy, um, at the moment. But obviously the UK has to face a slightly different challenge now with the restrictions on some of the AstraZeneca drugs, given that consignment in India and what's happening as well going on with the EU. And on that point, the EU are remaining pretty firm at the moment of their stance. A senior Brussels policymaker last night basically sought to quash any British hopes of obtaining AstraZeneca vaccines manufactured in mainland Europe, saying zero jabs will be shipped across the Channel if the company failed to meet its commitments in the bloc. I had a really good chat with Mike in our Amplify Live community in a session we recorded yesterday. And, you know, quite, quite key then at the moment, AstraZeneca are— well, the UK are pretty much going to put new first jabs on hold for the month of April as they look to use their Pfizer supply in order to enact then the second round of shots for those who've already received their first dose, given that they'll be hitting that 12-month or 12-week kind of marker. And at the moment, what we're on the lookout for is the Indian manufacturing firm Serum and whether the UK government, I guess, in some shape or form can break some— break some kind of deal with them in order to then release then further consignments of that 5 million or so AstraZeneca vaccines that have been pent up. Very much so that the EU unlikely to really play too many games around the Pfizer-BioNTech drug, even though it's manufactured to or in Europe and exported to the UK. The point is, is that certain ingredients in that process are derived from the UK, namely in Yorkshire, and so they would not want any retaliatory effect on what ultimately is Europe's key drug, which is that Pfizer-BioNTech one. So yeah, something to just be aware of. The other drug news came out in the New York Times actually just a few hours ago, and it's about Johnson Johnson's vaccine, which really is still to hit the market, but they have reportedly hit a delay due to a factory mix-up which has ruined apparently around 15 million doses. So worth being aware of that for, for the US in particular. Where a lot of their focus is going to be in terms of deployment of the early phase of manufacturing for J&J's vaccine. They have said they're still on target, shouldn't impede that. It was just one batch that's been affected because of a manufacturing issue that was experienced at the time. Okay, looking at the day ahead, what have we got? So just skipping over the Asian session with that now concluded, moving over to the European morning, you do get the manufacturing PMI numbers for the eurozone and the UK, but these are March final readings, not expecting too much there. Going into the afternoon, the buildup for non-farm tomorrow despite Good Friday closures continues, so we get weekly jobless claims. Um, we are expecting jobless claims to come in at 680 against 684 And so what does jobless claims look like? Well, you'll remember down here on the far right-hand side, last week we printed at 6, um, 684, in fact, for jobless claims. It was the lowest level since the pandemic hit the labor market in March 2020 last week. And we are actually looking for further gradual improvement, uh, in the job situation. So therefore, net a slightly lower jobless figure today. Um, in the short term, claims are expected to continue to decrease. The kind of passage of the relief stimulus from the Biden government in early March and several states easing their coronavirus-induced restrictions should lead to, in combination with a rapid pace of vaccinations, further people going into employment. I guess the thing we're yet to determine is, is that impeded at all by the slight uptick we've had in the last fortnight of US COVID cases and the recommendation for the president in order to be a little bit more cautious about the speed of that reopening process? But at the moment, the jobless should continue to paint a relatively good picture. If we get a 680 type reading, which was kind of the forecast estimate, I don't think necessarily it's particularly market moving. If anything, I'd probably see it as mildly positive in the sense that that pattern of improvement continues. The Fed obviously aren't doing anything at the moment, and that might help just generally support that overall growth kind of narrative at the moment. That's, that's helping just general market sentiment of Yields still remaining relatively high but not now impeding the equity performance, which is more focusing on the growth story, more generally speaking. The other data point that we have this afternoon from the US of significance is the ISM— US ISM Manufacturing PMI. And I just wanted to bring this up. This is like a looking back over the last 25 years or so for, for this particular reading because today the S expected value is for 61.3, um, so an improvement from the prior reading. If that did happen, uh, that would put us at a multi-decade high for this reading up here, kind of around 2004. Um, last month's reading saw the strongest expansion in factory activity in the US since February of 2018. So you can see here the rapid recovery that we've had since the trough that we hit shortly after the national lockdown experienced almost 12 months ago in the US. And so again, a supportive factor for, for markets, I think, intraday, short term, on a strong number. And again, the dollar could be interesting, particularly in the context then of just generally lower levels in the euro. We're not too far from where we were trading back on Tuesday's low was in proximity. And also the likes of that Aussie trade that we were just talking about a short while ago would be supported by strong data if we get further movement higher in dollar and yields in that respect. Um, and that's, that's pretty much it other than to conclude the OPEC meeting. Um, looking out for any, you know, rumors, things like that. A couple of the latest that I've seen this morning Um, was the JMMC has recommended the extension of compensation cuts until the end of September 2021, according to sources. So overall, the general theme here is we're not looking for any surprises, but we could have said that last time and they did surprise by, by rolling over when we were expecting moderate increase to supply. This time it's the other way around. So could they increase supply? They could. Will they do that? Highly unlikely. If they did do that, it would be sure thing and negative for price in the intraday environment. So really looking for confirmation, if anything, that they're just rolling over for the month of May, including the voluntary cuts from Saudi Arabia as well. They might give a minor gesture to the Russians to increase again marginally with Kazakhstan. I wouldn't read really too much into that. Those levels are fairly insignificant. to that degree, comparative to the actual supply across OPEC+. So yeah, could well be supportive of price, I guess, on the confirmation, perhaps a little bit of relief. But also, if we get strong data, low jobless, high ISM, that might help as well, the kind of growth view, and subsequently lift oil on demand, kind of side of things in the short-term kind of sentiment basis. But that's it. So again, don't forget to check out the podcast. Literally just jump on Spotify, hit the follow button, and then it will just update automatically when we launch the— or release the next episode on Friday morning. Cool. All right. I will see the guys in the Amplify Life community in the Discord room. Otherwise, for everyone else on YouTube, hit that like button and subscribe to the channel. Very much appreciate it. Have a fantastic long weekend for Easter. Take care, and I'll catch you later. Thanks very much.