In this market‑morning video Anthony Cheung provides a concise overview of global equity, bond and currency markets on the morning of April 13, 2021, followed by a deep‑dive into several macro‑economic headlines. He notes that the VIX is at a 13‑month low, equity futures are flat, the DAX is trading near its recent low, and gold has slipped modestly as the dollar firmed. He reviews recent US Treasury auction activity and highlights a modestly weaker Chinese trade balance, while pointing out that Treasury Secretary Janet Yellen is expected to refrain from labeling China a currency manipulator. The centerpiece of the commentary is Federal Reserve Governor James Bullard’s statement that a 75 % U.S. vaccination rate would be a trigger for the Fed to start discussing tapering of its bond‑buying programme. Cheung walks through current U.S. vaccination rates, supply timelines for Pfizer, Moderna and Johnson & Johnson, and projects that the 75 % threshold could be reached between mid‑June and mid‑July. He links this timeline to the upcoming June Fed meeting and the potential for a shift in policy communication. The video also covers the UK’s GDP print (0.4 % MoM, below expectations), the expected German ZEW sentiment reading, and the market’s anticipation of the U.S. CPI release later in the day, noting base‑effect considerations and the likely tone of Fed Chair Jerome Powell’s upcoming speech. The segment ends with a quick calendar of upcoming data releases and speaker events, and a call‑to‑action for viewers.
Chapters
Okay, very good morning. Welcome to the rundown for Tuesday the 13th of April. Uh, just going to get you up to speed on the close on Wall Street, which was relatively flat, what's happened overnight in Asia, some trade data to speak of. Just had the UK GDP numbers out. We've got German ZEW coming at 10 o'clock with US CPI at 1:30 this afternoon. Also some really interesting comments coming out of Fed's Bullard about a potential timeline for when we could see discussions over tapering in the US Federal Reserve, and then an update on US-China relations, the COVID program in the UK. So quite a few things there to get you up to speed on. But starting with the close on Wall Street, and I've got a chart here of the VIX, which has been trading at a 13-month low. I think most intraday speculative traders getting a little bit frustrated by the lack of movement we've been seeing, particularly in US equities of late. But I would say that's largely understandable. We have gone through a period of kind of the dust settling on fears about the kind of inflation expectations rising, higher yield movement, which we saw causing a degree of market disruption just a few weeks ago. The dust has settled on that topic, I would say, and people have acclimatized to the fact that there will be rising inflation, which we're looking for to materialize in the data later on today. Um, but I guess one thing with the VIX, we are trading below 20 at the moment. It is a 13-month low, as you can see on the chart here. Episodes of a kind of depressed VIX tend to be followed by breakouts of flashes of volatility. What that catalyst could be, really yet to be seen. But obviously I think markets have been quiet for a couple of different reasons. We've had the Easter holiday just, just recently. We've also got, from a calendar perspective, yesterday was particularly quiet, but we go into— from now, really, US CPI this afternoon. You've got retail sales, industrial, industrial production coming out later on in the week. You've got US earnings also commencing, with the big banks starting to report pre-market on Wednesday. So there's a few things coming up, and so I can understand people's kind of just sitting on their hands waiting for some further information to materialize. And particularly with— we've had a push-up quite nicely up to record territory once again in a number of the US indices. So a period of consolidation is not unusual, I would say, for the time being. But a quick look at the charts this morning, how are things as they stand? Well, equity index futures pretty, pretty flat open overall, not really too much to speak of. The DAX is trading absolutely flat in the futures market, just keeping an eye from that Friday low, which was the range weekly low generally that we had for the second half of last week coming up to the low that we printed at the open yesterday morning and the retest that we had late in the US session. That trend line just holding for the time being, but one to watch. Any breakdown of that be targeting down at that kind of double bottom that we saw yesterday evening for the DAX at 15,226. Upside break of range to keep an eye on today, 15,274 for any further push on the upside. We tested yesterday's high. He's got the R1 as well sitting just above. Otherwise, currency markets pretty quiet. The DXY did firm up a little bit overnight, but it's up only about 1/10, so marginal change if anything in the major pairs. Cables pretty much flat, and EUR/USD down just 10 pips. Bit of dollar appreciation overnight though has weighed on gold, just very mildly. We saw a breakdown technically of the, the move through yesterday's lowest point that was seen at 1727. And as you can see here, just saw a bit of a run on prices through that technical breach to come down to test at the S1 before seeing a bit of a bounce. So to me, definitely much more technical on that move as what would be characteristic of that extension on the wick on the gold price there. Directionally for gold, continuation to be— whether or not that move can be continued, I'd be looking at cues from the currency market, i.e., the directional play in the dollar, um, to get a bit more understanding of that, whether that will continue. Gold down $6 at the moment. Oil pretty much unchanged. And then in the 10-year, we are down about 4.5 ticks, and we're retesting the low we had on Friday. Um, the US 10-year yield sitting around 1.7% at the moment. You did have the double header yesterday, um, kicking off this kind of slew of bond issuance coming out of the US. in the, the days and weeks ahead. Um, we did have a 3 and 10-year note auction, slightly lower demand yesterday, but going out without— going through without any major hitches is the main kind of summary. You've got the 30-year bond auction happening at 6 PM later on, uh, tonight as well. As far as the overnight session is concerned, excuse me, I will shake off this cough at some point, hopefully in the near future. Um, but We did have some Chinese data overnight. I wouldn't say this is a great deal of, um, kind of reaction to this. Um, the trade balance headline figure, ¥89.98 billion versus expected ¥327 billion. So the surplus slightly smaller than expected. Exports, a miss on expectations, year-on-year 20.7 against expectations of 28.6. Imports though higher at 27.7 against 17.6%. And as you can see here, import growth the highest in 4 years. A couple of things that analysts were commenting on overnight when I've read about this Chinese trade data is they were kind of questioning the ability to— for China to continue to kind of remain so robust on the export side going forward in the weeks, months ahead as the vaccination rollout continues and other countries start to get back on their feet and manufacturing activity there starts to pick up. And kind of taking away then from the kind of China boom that we've seen after they were quite early in the reopening post the initial phase of COVID But all in all, I wouldn't read too much into the Chinese trade data. I don't think it's necessarily a particularly big deal this morning. Um, on the China front, something to be aware of is Treasury Secretary Janet Yellen will decline to name China a currency manipulator in her first semi-annual foreign exchange report, according to people familiar with the matter on Bloomberg. It hasn't been finalized yet. The report's due to come out on Thursday. Um, the reason why I'm just pointing this out, bringing to your attention, is because obviously there's an ongoing degree of friction at the moment as the Biden administration starts to find its feet at the initial negotiations with China, having had that meeting in Alaska just a few weeks ago. And so this could have been a potential platform to escalate that confrontation, but it doesn't look like that's going to happen at this point. So I'd say this is kind of a potential increase in risk over tensions on that relationship just being averted at this point with what's, what's said to have happened here. Um, the other thing I wanted to talk about a little bit more detail was this, this really interesting comments out of a Federal Reserve member called James Bullard. Now, Bullard is very leaning on the dovish side of the kind of monetary spectrum. Importantly, Bullard as well is a non-voting member. And a little bit of context as well about the individual himself: Bullard does tend to be fairly vocal about his thoughts on the economy and future monetary policy, and he has been known as well to flip-flop a little bit between his, his views So he kind of moves around the dove hawk kind of spectrum a little bit. So now that I've given its relevant caveats, what exactly did he say? Well, he said that getting 75% of Americans vaccinated would be a signal that the COVID-19 crisis was ending, and so therefore a necessary condition for the central bank to then start considering the conversations around bond buying tapering. Um, so that is probably the first, um, kind of numerical time or milestone that we've heard from a Federal Reserve official tied to vaccination. So the question is then, well, where are we with vaccinations at the moment, and can we extrapolate out then at what sort of timing could we expect this taper talk to start emerging, given that he's tabled a 75% figure for the initiation of that. And first things first, this is a look at the share of people who have received at least one dose of COVID-19 vaccine. And if we start to focus in here, you can see the UK out in front, um, coming up to around the 50% mark. But the United States also a real front runner on the developed world side of things. And I was looking at these numbers last night, 36% of Americans have been given a first vaccine dose 22% at the moment are fully vaccinated according to the Bloomberg vaccine tracker, and this data here would kind of match up with that. Now, one of the things I was looking at then was I was looking at generally what's the supply situation in America and when could we then start to expect a rough timeline of what it might look like when the US might be at a point where they hit 75% Here, what we're looking at is a time frame going from January, March, May to July, and we're looking at the three major manufacturers that supply vaccines in the US. As you can see, the one which has— is the smallest by far at this present point is Johnson Johnson. But as we go forward over time, going through into May, into June, the J&J manufacturing starts to pick up pace. And further larger quantities of supply start to be— to start to hit the market. Major milestones here, given the strategy of America has been mainly led by Pfizer and Moderna's vaccines. At the end of May, both those two companies have promised around 200 million extra shots to come. J&J's kind of milestone marker is by the end of June, a delivery of 100 million. So you can see here that the available kind of vaccine starts to really ramp up going forward, which should further accelerate what has been on average around 3.214 million shots being delivered in America. And it should be moving up to pretty much consistent record territory at the moment and moving faster. Applying the math, then it would take approximately around 3 months to cover around 75% of the population. So to see this number at 36, to get up to 75, we're talking May, middle of June, middle of July to get there. So this gives us a rough reference point then, if Bullard were to be believed, of when we could then start to be hearing about the overall kind of what's the state of the US economy at that point in time. There will be obviously lots of other variables to consider. That will be in play. And will the Fed then need to start altering their language? Now, I guess that puts even more pressure on the June meeting, which is the next, with the summary of economic projections from the Fed. They'll be particularly interesting because by that point we could probably extrapolate out the trajectory of how the vaccination path is looking from the US as to whether or not we're on track at that point. Plus as well, what is the current underlying macroeconomic situation from the data that we're seeing? Uh, so as we were saying, in the, at the actual March meeting of the Fed, the June one is becoming ever increasingly more important. Um, you know, even though with the VIX, I'm sure we'll see a breakout on the upside before then, but certainly by June, even though things economically might be really strong at that point in the US, actually from a policy perspective, it creates quite a headache. For the Fed to manage then a shift in communication? And could that be the disruptive next big market event that unfolds in the middle of the summer? We'll be interested to see. On the COVID side, as you saw, the UK is really a front runner in terms of the number of people who have been vaccinated with the first jab, coming up here around the 47.3% marker at the moment. The news generally has been that the, the UK has passed a significant milestone according to Prime Minister yesterday that they basically— they've conducted now and vaccinated everyone in the 9 highest risk groups, which means they can now push ahead towards their goal of vaccinating all other adults by the end of July. And so starting to target some of the demographic that's generally of a lower age, sub-50. On the calendar for today, what have we got? So just to wrap things up, We've already had the UK GDP come out, but as you probably saw in my morning notes, um, and, and subsequently in the movement in the pound, very limited reaction. The GDP estimate month to month, 0.4% against expected 0.6%. So a positive move back higher from what was a negative print we saw at the beginning of the month, but not surprising at all just given the fact that the previous numbers were very depressed, given the fact that we just went to a state of new national lockdown and also the new post-Brexit relationship between the UK and the EU. So A bit of a pickup, 0.4 against 0.6, is really not that meaningful at all as far as sterling is concerned. Otherwise, going further forward, we do get the latest German ZEW coming out. That is expected on the headline to show an improvement to 79 from 76.6. I don't necessarily think that that's going to be particularly market impactful, for the reasons being that perhaps analysts are a little bit more optimistic. The COVID situation still somewhat to be monitored very vigilantly in Germany given the recent uptick in cases. But given the rollover restrictions that we've had, it's almost like now we're seeing the light at the end of the tunnel. So there's room for very mild optimism going forward, but nothing I think that the markets are going to get excited about from a reactionary point of view. And then the main focus probably from a Canada perspective today is the US CPI report. As you can see here, the, the Year-on-year expected at 2.5% against 1.7%. The core expected 1.3%, so a little bit more moderate, uh, improvement from 1.3% last time out. Just to remind you, the analysts at Nomura made a good comment yesterday. They said that not to get too frothy over this release. A year ago, base effects will start leading US core CPI higher. So if you think about it, where we were back in 2020 in April, we just had an almighty hit to the global economy as the, the whole globe went into lockdown, and so demand dropped off a cliff. So if you're looking at the year-ago base effects and energy was crashing in April, it's the absolute opposite of where we are at the moment, where energy and fuel prices generally have been elevated. Um, so that's what this disparity will be between now starting to see quite rapid rises in inflation numbers, but perfectly explainable for these reasons, which should help markets rationalize and contain subsequent market kind of reaction to the numbers when they come out and if they are on the high side. The other thing is then, not only is these upticks inflation like to be expected, but likely to be managed again appropriately by Jerome Powell when he speaks. He's speaking tomorrow. He's probably going to just toe the line as he has done going forward. Otherwise, calendar, got the API crude oil inventories after market as usual. Couple of speakers, probably Daly, Barkin, and Bostic are the main ones because they're all voting members. They're going to be speaking all at 5 PM London time. And as I mentioned earlier, you've got $24 billion in the 30-year bond auction coming out the States with some Italian supply this morning for those interested. In the fixed income market. All right, that is it from me. Uh, any questions at all, feel free to drop me a comment. If watching this delayed on YouTube, don't forget to like and subscribe. And for the guys on Fire Live, I'll see you in the Discord room. Have a good day ahead.
