This Week In Markets: 6th - 9th April 2021

Okay, it is Tuesday the 6th of April of 2021, and I hope everyone had a good Easter long weekend if you're based in the UK and Europe. If you're in the US, hello and welcome back. And before I begin, just to say happy birthday to Tim Duggan, and it's the big 4-0 today. So Tim, I will speak to you shortly in the Amplify Live community, but I hope you had a great weekend and many happy returns. Um, but getting straight into things, what I wanted to do with the briefing today is really just get you up to speed on what happened in US markets yesterday, which were open, albeit still relatively light volume, before then the full reopening of the global market coming back in today. And then just have a quick look at what's in store for the week ahead as well. But to get you up to speed then, starting off with the close on Wall Street last night, which was a very positive one, as you can see here by the plethora of green across the board. The only kind of weak spots were energy, where oil prices did decline in yesterday's session. We do trade, albeit we have recovered, we did trade below a $58 handle yesterday. We're back up towards a $59.32 price at the moment in front month WTI futures. But as you can see here, really the tech space outperformed. You know, some of the tech giants like Google, Alphabet were up in excess of 4%. You might have read of a US Supreme Court ruling that the company did not commit copyright infringements when it used Oracle programming code in its Android operating system was the chief reason what underpinned the share price rise in Alphabet shares yesterday. Facebook moved up to a record high for the stock. Tesla was up about 4.43%, the first chance for the company to react to their blowout delivery numbers in Q1. There are around 184 185,000 against expectations around 170,000. So much stronger than expected. Um, the, the rally generally as well coming after some really quite spectacular data starting to come through in the US. Um, to get you up to speed, I'll go in chronological order. If you weren't around on Good Friday, then US electronic trade was open for a shortened session. We did see the release of US non-farm payrolls And as you can see here, the headline print came out at 916,000. Expectations were for 647,000 for that figure, so it was much stronger than expectations. And as you can see here, puts us back up at a multi-month high from, uh, numbers we haven't really printed going back to the summer of last year. And then yesterday, what did we have? We had the ISM Non-Manufacturing PMI. The services figure came in at 63.7 against expected 59. So again, blowout of forecasts, um, experienced the fastest growth on record in March as measures of business activity and orders advanced to new highs as well. Main real reason that underpinning this is not really new information to everyone, the idea of better weather. We've had positive vaccine news, further distribution of the drug as well, and that subsequently leading to the reopening of the US economy, which is leading to greater US job growth, more spending, so on and so forth. So that idea of this kind of economic boom almost is going to happen in, in the coming months, starting to materialize somewhat. But that does lead then on to an interesting path or communication challenge that ultimately will need to be met by the Federal Reserve. That's going to be, well, if we do have this rip-roaring recovery, Well, then at what point does the Fed start to change their language from this ultra-accommodative stance, which they've stuck to despite yields having risen? I must say yields in the 10-year have backed off a little bit from kind of up there at 1.75. We're just below the 1.7 level at the moment. So equities were really positive yesterday. The yield actually declining a little bit, just allowing T-notes to come off the floor, and the dollar really got hit, which did accelerate, boost the major currency pairs. In yesterday's session as the general positive sentiment. Um, as I said though, the Fed will be interesting in the months ahead because ultimately, you know, do they need to pay heed at some point to the idea of that the economy is improving? Now, one speaker that did speak yesterday, I think it was a CNBC interview that I thought was quite interesting, was Fez Mester. Mester said that better than expected March payroll report was great but a lot more progress was needed to get the economy where it was before the pandemic. She added, I think we'll need to be very deliberately patient in our approach to monetary policy and really focus in on hitting these goals where we have monetary policy. I'm thinking that we'll see a very strong second half of the year, but we're still far from our policy goals. Now, a couple of things here. For one, Mester is a non-voting member. However, one of the things I would say is that, you know, if you know your, your FOMC members, then Mester here, a non-voter, so unbolded, but is one of the most hawkish of the Fed members, only probably George and Kaplan more so. And that I thought was quite interesting, the fact that she's continued to push back some of this economic acceleration that we're seeing. Ultimately, I think rates markets will start to bring forward in what you would be expecting is continuation of these really firm narrative on the reopening trade actually materializing in economic data in the months going forward as we continue to reopen, all things remaining equal in the US. So rates markets will probably continue to bring forward interest rate rises. But, you know, not forgetting that although these numbers are really fantastic, The Fed dot plots that we saw not that long ago did say that economic kind of GDP would be around 6.5% at the end of the year. So how surprising is this? Not too surprising, I guess. What needs watching at the moment is at what point then do we see these, these numbers, if they continue to really surprise on the upside by a large gap in a positive way, and that just continues on, indicative then of growth perhaps being even further than 6.5% by the end of the year. And we're not going to see this for a number of months, but if that were the case, well then that's going to be then an interesting challenge to, to be met for, for the Federal Reserve. But at the moment, as you can see for markets, certainly coming off yesterday's session, um, you've just got an almost again, uh, a Goldilocks environment where the markets content and happy to see economic improvements that are happening in the US and willing to then just see that in the backdrop of the Fed at the moment just keeping a fairly loose stance to policy for the time being. So without any change on the latter, then it's kind of all gravy for equities for the moment, direction-wise. And, you know, just looking at the S&P from when I left the market on Thursday to when I turned on my screens this morning, We're up now at a high in the futures at 4074.5, uh, quite incredible really. Um, the other thing to mention then, and a few others, was in the overnight Asia-Pac session, um, things were a little bit more sour, I would say, to mixed. Um, I think the Aussie market outperformed. You did have the RBA keep their cash rate and their 3-year yield target unchanged. at 0.1% as expected. They maintained parameters of their QE program. The board said they remain committed to maintaining highly accommodative policy until their goals were met. But focusing on China, you're looking here at the services PMI. We had the Caixin number overnight, came in at 54.3 against expectations of 52.1. So that was better than expected. However, more broadly speaking, Chinese equity markets were lower after the back of a release of a report suggesting then that China's central bank has asked the nation's major lenders to curtail loan growth for the rest of the year after a surge in the first 2 months has stoked bubble risks, according to people familiar with the matter. So, um, that was really what caught the attention, uh, in the local domestic market overnight and was a bit of an overhang for the Asia-Pacific session. As far as the European Open is concerned, obviously we're playing a bit of catch-up given the closures that we observed on Easter Monday. So the DAX gapped up quite aggressively, as you can see here. Um, we've seen some initial tests here at the R2 exactly, some profit taking back down to literally back to where we reopened before. We've had another push here, just gone through 7 AM now as I'm recording this here. In London. Um, quick update on COVID, what's going on there. A few things to mention. First off, before I talk about the US, on my screen here, the UK government has confirmed restaurants, pubs, and shops will reopen as England's lockdown is eased next week, obviously on Monday, April 12th, an existential marker in that 4-step road plan. The ban on foreign travel may remain, remain for a little longer though. That's what the PM said last night, so nothing particularly too new or shocking there. On the US side of things, new cases of COVID-19 cases in the US rose 5%, uh, more than 450,000 last week. And if you remember from my kind of first day of the week briefings I've delivered the last 3 weeks, this is in fact the 3rd week in a row now that infections in the US have risen. I did see some charts, it's very kind of state-oriented, oriented Michigan was one that's really rocketed more recently, but definitely constitutes keeping an eye on. However, equally so though, for a 6th week, vaccinations in the US have set a record. By the numbers at the moment, to give you some context, an average of 3.1 million shots given per day last week. As of Sunday, 32% of the population has received at least one dose have been fully vaccinated, according to the CDC. Elsewhere on a global level, one country that's getting quite a few headlines at the moment in the emerging markets is that of India. India, which, who of course are the world's largest vaccine manufacturer and particularly important for the likes of the UK through Serum, is going to be quite key because they do— they need to really take care of their domestic situation, which is getting materially worse at this present point in time. As are their neighboring countries in Pakistan and Bangladesh right now, before they can then start to service other orders from external on a global level. But India is recording the highest number of new cases in the world as it struggles to contain this latest surge in infections. But did read one quite interesting thing at the weekend, uh, this idea— although the dollar's been softer yesterday, a little bit weaker this morning— an interesting idea about the disconnect or the disjointed reopening trade that we're going to see globally Nothing particularly new here, but was always going to likely be the case that developed worlds were going to be able to have the money to finance then the, um, obtainment of vaccines to roll them out and, and probably got more money to spend on infrastructure and so on to be able to get people administered. But at the moment, if you're seeing the US, uh, quite a firm reopening, an economic boom, whereas in the likes of India we're seeing a wave that's even more aggressive now than we've ever seen before, then obviously, although both these countries will end up in the same place ultimately, in the interim period, you know, could there be quite a, a divergence there between more positive, obviously, fundamental catalyst driving US assets comparative to emerging markets, which are going to lag for the foreseeable future. Then a quick look at the, the economic calendar for this week. It is actually pretty quiet overall. Um, you've got yesterday's session was, was probably most interesting in terms of from a data perspective to some degree. Excuse me. Um, but going into today's session is pretty quiet. There's nothing really too major to, to look out for. So really just awaiting UK, Europe to get their feedback under the table and really digest and react to some of the positive catalysts that were driving US markets and sentiment yesterday. So just keeping an eye on equities. I mean, as I speak, the DAX futures coming back, right back up to the initial reopening electronic trade overnight high. And if we see a continuation of those trends, then you're seeing a third real test now up and around just above 139.20 in cable, which is that level we hit yesterday, as per the double top in the euro is not too far off as well. At the moment. Wednesday we get the service PMI numbers, but these are final readings, not looking for too much there. But do note then we get the FOMC minutes which will be published on Wednesday evening. We've got Fed's Evans, Fed's Kaplan, Fed's Barkin discussing monetary policy and economy on the latter. And then Thursday you get the ECB minutes, you get the weekly jobless claims, and Fed Chair Jerome Powell takes part in the IMF panel on the global economy. So That's one of the main speeches of the week. Then going into Friday, Chinese inflation metrics will be seen overnight. So we'll have those to digest when we come in in the morning. And then otherwise, what is a fairly quiet session thereafter. And that is it. So I haven't really talked about the charts too much, but that's because I'm going to leave it to the team— Sam, Tim, and the others— to go through that in the Discord room on Amplify Live. So hopefully I'll see you guys on there. If you're watching this on YouTube, as ever, thank you very much for watching. If you're not a subscriber to the channel, please do hit that subscribe button, hit the bell icon to be notified whenever any of these briefings go out on a daily basis. All right guys, welcome back and good luck for the session ahead. Thanks very much.