Futures Tumble As Tech Stocks, Cryptocurrencies Crash

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by Tyler Durden
Tuesday, Feb 23, 2021 - 07:44 AM

Global stocks, US equity futures and cryptocurrencies all tumbled on Tuesday as the recent surge in inflation, bond yields and commodity prices continued to hammer technology shares while investors awaited fresh reassurance from U.S. Federal Reserve Chair Jerome Powell on the path for monetary policy in United States.

The MSCI world equity index fell 0.1% to fresh two-week lows, having earlier risen on gains in commodity-heavy equity indexes in Asia. After rising during the Asian session, S&P 500 futures also fell once Europen came online, and were last down 0.4%.

Nasdaq futures tumbled as much as 2%, and were last down 1.4% a day after the tech-heavy gauge posted its longest losing streak in four months. Heavyweight tech stocks slid premarket, with Apple -2.7%, Amazon -2.4%, Tesla -7.5%, Alphabet -1.6%. Tesla crashed 6% in pre-market trading, sliding below the $695 level at which it entered the S&P500.  Tesla shares were set to plunge into the red for the year, hit by a fall of bitcoin, in which the electric carmaker recently invested $1.5 billion.

Adding to the risk off mood, Bitcoin resumed its recent plunge, plunging as much as 17% below $46,000, down over $12,000 from recent highs after a bout of volatility highlighted lingering doubts about the durability of the token’s rally.

"The prospect of a less dovish tone from central banks, sparked by rising inflation, is causing stock traders to reduce their exposure to equities, especially overbought sectors like tech," said Pierre Veyret, analyst at ActivTrades in London. Another concern among investors is that broad benchmarks have already priced in much of the prospective global recovery spurred by vaccines and U.S. stimulus. Alongside rising inflation, another is that central banks may eventually start reconsidering emergency programs that have supported global markets.

Europe's Stoxx 600 was down -0.8%, sliding as much as 1.6% earlier, with Tech stocks leading losses. European tech stocks were on set for their worst day in four months, down 2.7%, and the worst-performing index in Europe, as chip-equipment makers plunged  amid market rotation out of more expensive sectors. Pandemic winners also dive. The index fell as much as 3.9% to a three-week low, the steepest intraday drop since Oct. 26. Chip- equipment makers, which have benefited amid a global shortage of semiconductors and are among the best-performing tech stocks in Europe this year, declined sharply: BE Semi -7.2%, ASMI -6.1%, ASML -3.4%. On the other end, mall operators, office landlords and events companies rose in Europe on increasing optimism about the prospects for reopening the Covid-hit economy following news that Germany mulled loosening the rules for easing lockdown restrictions. That followed the U.K. having set out an aim to gradually ease restrictions in stages over the next four months.

Here are some of the biggest European movers today:

  • Chip stocks fall on Tuesday, weighing on the Stoxx Tech Index, reflecting declines across U.S. semiconductor peers late Monday, as market rotation out of more expensive stocks and sectors gathers pace.
  • Covestro shares jump as much as 3.4% before erasing gain in Frankfurt; Commerzbank says the company published a “strong” 1Q outlook, but a cautious view on 2Q to 4Q, leaving upside to consensus.
  • U.K. domestically oriented stocks gained on Tuesday as travel and entertainment shares surged after Prime Minister Boris Johnson announced plans to reopen the economy.
  • KPN shares tumble as much as 10%, their biggest one-day drop since June 2016, as America Movil sells around EU2.2b of bonds exchangeable into shares in the Dutch phone company.
  • Adyen shares drop as much as 4.5% to a two-week low of EU2,056, after a pre-IPO investor sells shares in the payments firm.

Earlier in the session, Asian stocks rose clearly unaware of the shitstorm that was about to be unleashed by European traders, with equity benchmarks in Thailand and Hong Kong the biggest gainers in the region. The SET Index jumped as much as 2%, with tourism and leisure stocks rallying the most on the gauge amid optimism over the arrival of Covid-19 vaccines and relaxation of pandemic-led restrictions. Casino operators Galaxy Entertainment Group and Sands China surged to be among the top gainers on the Hang Seng Index, after Macau reopened to quarantine-free travel from mainland China. Energy was the top-performing sector in Asia as oil surged toward $63 a barrel. Investment banks and traders predicting the market will tighten further and push prices higher. Technology was the worst performer. The MSCI Asia Pacific Index headed for its first gain in four sessions, with equity benchmarks in Australia and Singapore also rising. Stocks were lower in South Korea and Malaysia, while Japanese markets were shut for a holiday.

India stocks ended little changed, after swinging between gains and losses several times in the session. The S&P BSE Sensex closed marginally higher at 49,751.41 in Mumbai, while the NSE Nifty 50 Index added 0.2%. Both gauges had retreated more than 4% through Monday from record highs on Feb. 15. Reliance Industries Ltd. gave the biggest boost to both measures after saying it plans to spin off its oil-to-chemicals operation into an independent unit. A gauge of metal companies was the top performer among the 19 sector indexes compiled by BSE Ltd

Rising inflation bets spurred by the global economic recovery have hammered stocks in the past week. The level of angst was also reflected in various equity volatility gauges which rose to multi-week highs, while on bond markets German and U.S. yields moved in different directions, even though both remained just below the highs hit on Monday. 

After being knocked off from eight-month high by European Central Bank chief Christine Lagarde signalling discomfort with the recent surge in yields, 10-year Bund yields resumed their upward trend and were last at -0.297%.

In rates, Treasuries steadied on Tuesday, below Monday’s one-year high of 1.394% and were last at 1.360%. Yields were cheaper by ~1bp across long-end of the curve, steepening 5s30s by ~2bp after the 5s30s touched the highest level in more than six years. A wider bear-steepening move in under way in bunds, which trade 4bp cheaper vs Treasuries. The curve steepened, pivoting around a little-changed 10-year sector. Month-end re-balancing flows are moving into focus as traders anticipate rotation into bonds. Auction cycle begins with 2-year notes, while Fed Chair Powell delivers semi-annual monetary policy report.  Most peripheral and semi-core spreads widen to Germany; Italy outperforms, tightening ~1bps at the long end

Traders will be waiting to hear from Fed Chair Jerome Powell when he testifies to the Senate Banking Committee on Tuesday and the House Financial Services panel the following day. He’s expected to be reassuring on the central bank’s dovish stance when he gives his congressional testimony at 1500 GMT in Washington, and to play down the risk of inflation despite the size of President Joe Biden’s $1.9 trillion coronavirus relief proposal.

“Fed Chair Jay Powell will be torn today,” ING analysts led by Padhraic Garveywrote in a anote. “A bit of inflation is a good thing; it’s what the Fed has wanted. But too much anticipation of it is not good, as it tightens policy prematurely.”

“If there were already any expectations that Powell could try to calm down rates, then (Lagarde’s remarks) have just further cemented them,” said Giuseppe Sersale, strategist and fund manager at Anthilia in Milan.

In currency markets, the dollar briefly dropped to its lowest since Jan. 13 before advancing against most G-10 peers, with traders waiting to see if Powell will address the selloff in Treasuries. The pound led G-10 gains, nearing $1.41 as investors digested the U.K.’s plan to open up the economy. The Canadian dollar outperformed most peers as oil prices continued their ascent.  The dollar index was up 0.1% at 90.137, with the euro flat at $1.215.

Commodity prices strengthened again with Copper extending gains, while WTI crude rose toward $63 a barrel. Oil prices jumped by more than $1 at one point, underpinned by optimism over COVID-19 vaccine rollouts and lower output as U.S. supplies were slow to return after a deep freeze in Texas shut in crude production last week. Brent crude was last up 0.7% at $65.7 a barrel after earlier hitting a fresh 13-month high of $66.79, while U.S. crude rose 0.8% to $62.17 a barrel.

“Oil has been caught up in the broader commodities move higher, with a weaker USD proving constructive for the complex,” ING strategists led by Warren Patterson said in a note. “Meanwhile, there is also a growing view that the oil market is looking increasingly tight over the remainder of the year”.

Copper prices meanwhile hit a 9-1/2-year high as tight supply and solid demand from top consumer China boosted sentiment.

To the day ahead, and the highlight will be the aforementioned appearance of Fed Chair Powell before the Senate Banking Committee. Otherwise, data releases from Europe include UK unemployment for December and the final Euro Area CPI reading for January, while from the US there’s the Conference Board’s consumer confidence indicator for February, the Richmond Fed’s manufacturing index for February and the FHFA house price index or December. Lastly, earnings releases include Home Depot, Medtronic and Intuit.

Market Snapshot

  • S&P 500 futures down 0.3% to 3,860.50
  • SXXP Index down 1.2%
  • MXAP up 0.1% to 216.65
  • MXAPJ up 0.3% to 725.81
  • Nikkei up 0.5% to 30,156.03
  • Topix up 0.5% to 1,938.35
  • Hang Seng Index up 1.0% to 30,632.64
  • Shanghai Composite down 0.2% to 3,636.36
  • Sensex little changed at 49,720.21
  • Australia S&P/ASX 200 up 0.9% to 6,839.17
  • German 10Y yield up 4 bps to -0.30%
  • Euro little changed at $1.2155
  • Kospi down 0.3% to 3,070.09
  • Brent futures up 1.2% to $66.03/bbl
  • Gold spot down 0.2% to $1,806.15
  • U.S. Dollar Index up 0.1% to 90.14

Top Overnight News from Bloomberg

  • The U.K.’s finance minister Rishi Sunak is set to spend billions of pounds in extra support for the economy over the next four months, as pandemic curbs pushed unemployment to its highest level in almost five years
  • Copper rose to the highest level in over nine years as a rally in industrial metals showed little sign of abating amid a global recovery from the pandemic
  • European Central Bank President Christine Lagarde said her institution is “closely monitoring” the market for government bonds, in a sign that she might act to prevent rising yields undermining the economic recovery from the pandemic
  • Oil extended gains near $62 a barrel with investment banks and traders predicting the market will tighten further and push prices higher
  • Commodities rose to their highest in almost eight years amid booming investor appetite for everything from oil to corn. The Bloomberg Commodity Spot Index, which tracks price movements for 23 raw materials, rose 1.6% on Monday to its highest since March 2013
  • In Brazil, investors unloaded everything from state- run companies to bonds and the currency after President Jair Bolsonaro ousted the head of oil giant Petrobras, sparking worries of government meddling and a break with his administration’s market-friendly pledges
  • Japan is planning to lift the state of emergency in places outside the Tokyo metropolitan area earlier than planned, with falling numbers of coronavirus cases easing the strain on hospitals, the Asahi newspaper reported Tuesday
  • U.S. deaths passed the 500,000 mark on Monday. Global deaths related to Covid-19 have surpassed 2.46 million, with the U.S. leading all countries with more than twice the number recorded by the next closest, Brazil, according to Bloomberg’s virus tracker

A quick look at global markets courtesy of Newsquawk

Asian equity markets eventually traded mostly positive after weathering the initial choppy price action following on from the mostly negative lead from Wall St where sentiment was pressured amid underperformance in tech and continued increases in yields as US money markets brought forward bets of a Fed rate increase and priced in a 70% chance of a 25bps hike by end-2022. ASX 200 (+0.9%) shrugged off the early tech-led declines and found support from strength in the commodity-related sectors especially energy stocks after oil prices continued to rally and as financials benefitted from the rising yield environment. KOSPI (-0.1%) lagged its peers in a resumption of this year’s consolidation above the 3,000 level and with a miss on earnings from drug manufacturer Celltrion weighing on other domestic pharmaceutical heavyweights. Hang Seng (+1.6%) and Shanghai Comp. (+0.4%) began indecisive following a tepid liquidity effort by the PBoC which injected a net CNY 10bln, while US-China tensions continued to linger as US House Speaker Pelosi suggested all options are on the table in holding China accountable for human rights abuses and State Department spokesman stated that recent comments by China Foreign Minister Wang Yi reflected the continued pattern of Beijing averting the blame. However, Chinese markets then gained with Hong Kong leading the advances as the Chinese oil majors reacted to further upside in crude prices and with HSBC leading the banks amid its earnings release in which it reported a decline in FY net and revenue but announced a resumption of its interim dividend. As a reminder, Japanese markets were closed in observance of the Emperor’s Birthday holiday.

Top Asian News

  • China Must Reform Hong Kong Election Rules, Carrie Lam Says
  • Axiata Tower Unit Stake Sale Is Said to Stall After Myanmar Coup
  • Japan Seen Ending Virus Emergency Early Outside Tokyo Region
  • HSBC’s Asia Bankers Do Better Than Peers as Bonus Pool Cut 20%

European equities kicked off the session with mild gains across the board, but the momentum then reversed and major bourses now trade notably lower (Euro Stoxx 50 -1.4%) following on from a mixed APAC handover. US equity futures have also given up overnight gains, with the tech-led NQ (-1.8%) again the underperformer during early European trade – as traders and investors seemingly rotate out of “stay at home” tech stocks and into more commodity and recovery-driven names. Meanwhile in Europe, UK’s FTSE 100 cash (-0.8%) was initially resilient, and remains comparatively so to a degree, after UK PM Johnson provided recovery stocks with a boost as he unveiled a roadmap out of lockdown - with the 'finish-line' currently on June 21st. This announcement has seen a surge in airline bookings, with easyJet (+8.2%) reporting that summer flight bookings rose 337% W/W and holiday bookings surged 630%. In turn, assisting regional airlines with impetus as IAG (+6%) and Ryanair (+4.3%) cheer the light at the of the tunnel, whilst EU airliners Lufthansa (+7%) and Air France-KLM (+5%) are dragged higher in tandem – note, this would also be bullish for the energy complex amid higher jet fuel demand. As such, the gains across the oil complex has also translated to gains among the FTSE 100’s oil giants Shell (+1.7%) and BP (+2.8%), whilst the extended rally in base metals, namely copper, has again bolstered UK miners – with index heavyweights Rio Tinto (+1.7%) and BHP (+3%) reaping rewards. The performances mentioned above is reflected in the regional sectors, with Travel & Leisure topping the charts, closely followed by Oil & Gas, Basic Resources and Banks. The latter is supported by the overall higher yield environment, whilst HSBC (-1.3%) conformed to the broader sentiment after topping FY/Q4 pretax and FY CET1 ratio forecasts and announced a dividend. However, the group downgraded the language surrounding its ROTE target. Tech is the notable laggard in tandem with the performance in NQ futures, with healthcare also residing towards the bottom of the pile. In terms of movers, the top gainers in the region consists of the most-hit pandemic stocks including the likes of Cineworld (+11%), airliners, aircraft manufacturers and hotel names, with the other side of the spectrum is comprised of the COVID-beneficiaries including Ocado (-5%) and Delivery Hero (-4%).

Top European News

  • BlackRock Strategists Debut OW Call on U.K. Stocks, Lift Europe
  • French Have a $146 Billion Savings War Chest From Covid Crisis
  • Aviva Sells French Arm for $3.9 Billion in Key Deal for CEO
  • Sunak Plans More Covid Aid for U.K. as Unemployment Climbs

In FX, the Dollar has lost a bit more of its yield advantage, but not all attraction as a safe-haven it seems given that the index has regained some composure after a more pronounced pull-back from recent recovery highs. The DXY is holding around 90.000 within a 89.941-90.194 range ahead of US housing data, consumer confidence, regional Fed surveys, Discount Rate meeting minutes, the first semi-annual testimony from chair Powell and the Usd 60 bn 2 year note auction that could set the tone for this week’s issuance remit. Note also, the Greenback is getting a boost from another abrupt and sustained reversal in crypto currencies like Bitcoin that is back below the Usd 50k mark and has been down to Usd 45k vs its new circa Usd 58.5k record peak.

  • GBP/EUR/NOK/CAD - Relative G10 outperformers, or at least displaying some resilience in face of the Buck bounce, as Sterling eyes 1.4100 in wake of UK PM Johnson’s 4 step plan to reopen the nation, and the Euro finds support around 1.2150 where technical levels form a cluster with hefty option expiry interest (50 DMA at 1.2154 today, 50% Fib of the fall from 1.2349 in January to 1.1952 current m-t-day low at 1.2151 and 1.6 bn at the 1.2155 strike). Meanwhile, further upside in oil, with WTI touching Usd 63/brl and Brent above Usd 66.75 at one stage is helping the Norwegian Crown to pare losses between 10.3425-10.2825 parameters against the Euro and keeping the Loonie anchored to 1.2600 vs its US counterpart in advance of comments from BoC Governor Macklem.
  • NZD/AUD - Both off best levels as broad risk sentiment sours, but the Kiwi has unwound declines vs the Aussie from around 1.0827 following weaker than forecast NZ retail sales and another boost for the latter via base metals. Hence, Nzd/Usd is holding firmer on the 0.7300 handle than Aud/Usd in relation to 0.7900 before construction work done, wages, RBNZ policy meeting and press conference.
  • JPY/CHF/SEK - The Yen could not maintain momentum through 105.00 overnight, perhaps due to the lack of Japanese participation on the Emperor’s Birthday market holiday, but the Franc is underperforming again and back beneath 0.9000 with little support from mildly less deflationary Swiss producer and import prices on a y/y basis. Indeed, Eur/Chf is firmly above 1.0900 and has nudged 1.0949 in keeping with upside in Eur/Sek after recent approaches towards 10.0000 failed to breach the round number and the cross retraces amidst more dovish-leaning Riksbank remarks (Bremen latest) and a rise in Swedish unemployment.

In commodities, WTI and Brent front month futures have given up intraday gains as sentiment across the market deteriorated during early European trade. WTI now resides closer to USD 62/bbl (vs high USD 63/bbl) and Brent has relinquished its USD 66/bbl handle (vs high USD 66.79/bbl). However looking at the bigger picture, the complex remains elevated by underlying fundamentals still being present such as OPEC+ support and vaccination progress. Moreover, production in the oil-pumping state of Texas is returning at a slower pace than previously anticipated. In turn, due to this weather event and Texas producing just under half of all US oil, a distortion in this week’s inventory and production figure may be seen. On the demand side, UK PM Johnson announced the UK’s roadmap for lifting restrictions against COVID moving ahead. This announcement translates into a bullish prospect for jet fuel demand, as within the plan it highlights the opening of holidays and ability to travel abroad in the Summer. Both the supply and demand factors could be regarded as the driving force behind the firmer price action overnight, whilst sentiment took helm in early hours. Notable tail-risks on the table surrounds the UK lockdown plan, which is data driven and hence, if the figures are not favourable it could see a change to the roadmap moving forward. Also, the OPEC+ confab is next week (JMMC on the 3rd and OPEC+ on the 4th), and participations will pay close attention to the sentiment between Saudi Arabia & Russia. With the COVID outlook looking increasingly favourable, the conservative Saudi Arabia and hawkish Russia may clash heads, again, thus a clear downside risk is present heading into the policy-setting meeting. Elsewhere, precious metals seem to be influenced by Buck, with spot gold relatively contained just above USD 1800/oz and spot silver resides around USD 27.85/oz (vs high USD 27.94/oz) . Turning to base metals, LME copper remains above USD 9,000/t but trades off best levels and edging closer to session lows as the firming Dollar and destination sentiment weigh on the recovery-driven metal. More on copper, Chile's state-owned Codelco, the world's largest copper producer, states the recent spike in the price of the red metal could increase miner’s costs. Lastly, Dalian iron ore futures fell 2% after top steel-producing city Tangshan issued a second-level pollution alert forcing mills to curb production.

US Event Calendar

  • 9am: Dec. S&P/Case-Shiller US HPI YoY, prior 9.49%
  • 9am: Dec. S&P CS Composite-20 YoY, est. 9.90%, prior 9.08%
  • 9am: Dec. FHFA House Price Index MoM, est. 1.0%, prior 1.0%
  • 9am: 4Q House Price Purchase Index QoQ, prior 3.1%
  • 10am: Feb. Conf. Board Consumer Confidence, est. 90.0, prior 89.3;
  • 10am: Feb. Richmond Fed Index, est. 16, prior 14

DB's Jim Reid concludes the overnight wrap

Yesterday had more twists than your average Shakespearian drama in what was a pretty topsy-turvy day for global markets. Equities sold off again on the back of continued concerns over inflationary pressures, while sovereign bonds swung between gains and losses with yields around 3bps higher in the US but around 3bps lower across Europe. Meanwhile, commodities hit 7-year highs, Bitcoin traded in a 17% range, and Tesla (-8.52%) technically tipped into a bear market.

Looking at the moves in more depth, all of the major equity indices on both sides of the Atlantic lost ground, with the S&P 500 (-0.77%) experiencing its 5th consecutive decline and the VIX index of volatility rising +1.40pts to its highest level in nearly 3 weeks. As it happens, the last time the S&P saw that many straight moves lower was exactly a year ago during the last week of February 2020, when global markets saw their first major pandemic-led sell-off. Europe’s STOXX 600 (-0.44%) outperformed, in part due to its smaller exposure to Technology companies. The tech-heavy NASDAQ composite fell -2.46% in its worst day so far this month with some of its largest names seeing heavy losses, namely Tesla (-8.52%), Apple (-2.98%) and Microsoft (-2.68%). Tesla is now only up c.1% YTD having been nearly +25% less than a month ago.

Tesla and Bitcoin are increasingly tied together and the latter had a crazy day, trading down -16.53% at one point before closing -4.21% in its worst daily performance this month. It’s not clear if the moves were prompted by a delayed reaction to an Elon Musk tweet on Saturday in which he said that the bitcoin did “seem high”. Bitcoin prices are down a further -10.54% this morning to $49,145 and are approaching yesterday’s lows again.

The risk-off sentiment has come to a halt in Asia this morning though with the Hang Seng (+1.67%), Shanghai Comp (+0.59%), Kospi (+0.27%), Asx (+0.86%) and India’s Nifty (+1.14%) all up. Japanese markets are closed for a holiday. Futures on the S&P 500 are also up +0.54% and European ones are pointing to a positive open too. Yields are fairly flat.

Back to yesterday and it was another strong day for oil prices with WTI up +3.80% and Brent crude gaining +3.70% to finish over $65/bll, this helped the energy sector continue to outperform (S&P Energy +3.46%) and fuel the cyclical rotation trade. The strength in oil prices followed news of accelerating drawdowns of global inventories and improving demand conditions. WTI (+1.62%) and Brent (+1.82%) continue to climb this morning with Brent crude trading at $66.43, the highest since November 2018. Elsewhere, copper advanced further (+1.64%) yesterday to its highest level in nearly a decade. In fact, the Bloomberg Commodity Spot Index also rose +1.64% to reach its highest level since March 2013, on the back of the move in industrial metals and the jump in oil prices.

For sovereign bond markets, it was a much more divergent performance, with Europe seeing a reasonable decline in yields whilst those on 10yr Treasuries actually rose +2.9bps to 1.365%. That was beneath its intraday high of 1.393% though, but still marked its highest closing level in nearly a year. Today, all eyes will be on Fed Chair Powell, who’s testifying before the Senate Banking Committee when delivering the semiannual monetary policy report to Congress. According to our US economists, Powell is likely to reiterate his messages that a "patiently accommodative" monetary policy is important, and that the US is still "very far" from a strong labour market. Real yields have continued to climb ahead of his appearance, however, with 10yr real yields hitting a 3-month high yesterday of -0.79%.

I did a CoTD showing real yields back over 200 years and highlighted that the only time real yields are negative for any period of time are around episodes of high debt. Given today’s debt levels, it’s likely real yields will stay ultra low for as far as the eye can see even if we’re seeing some cyclical pressure now. If real yields got anywhere close to long-term norms, debt sustainability would be seriously questioned and hence the Fed would likely step in well before. Financial repression and QE will likely be alive and well for the rest of most of our careers. See the piece here.

Over in Europe, yields were on track to hit their highest in months as well, but swung round mid-session to move lower following comments from ECB President Lagarde. Notably, she said that the ECB were “closely monitoring the evolution of longer-term nominal bond yields”, which isn’t generally a phrase you’d use when you welcomed the recent rise. Given that 10yr Bunds are still -0.34% it’s a remarkable situation that one can be getting uncomfortable with the move. Anyway, yields fell in direct response, with those on 10yr bunds (-3.4bps), OATs (-3.6bps) and BTPs (-2.6bps) all ending the day lower. Gilts (-1.9bps) continued to underperform bonds elsewhere however, with the spread between their 10yr yields over bunds widening to their biggest level in nearly a year.

Elsewhere, news that President Bolsonaro fired the head of Petrobras – a state-run oil company – roiled markets there, as investors took the move as a sign that some of the Brazilian President’s market-friendly initiatives may be rolled back. Brazilian markets saw their worst day since the autumn, as the Ibovespa index lost -4.87%, with state-run companies leading the declines. It was the biggest loss for the equity index since October of last year and Petrobras, the third-largest component of the index, finished the day down -21.19%. Meanwhile, the Brazilian 10yr yield rose +18.0bps to close at its highest level since late-March.

On the pandemic, studies added to a growing body of evidence that the vaccination programmes are beginning to have an impact. One in Scotland published yesterday, albeit not peer-reviewed yet, found that the AstraZeneca/Oxford vaccine reduced hospital admissions by 94% with a single dose 4-6 weeks after vaccination, while the Pfizer/BioNTech vaccine led to an 85% reduction. On top of this, a separate analysis from Public Health England found that a single dose of the Pfizer vaccine reduced the risk of catching infection by 85% after the second dose.

These positive announcements yesterday coincided with Prime Minister Johnson’s moves to outline the roadmap out of the English lockdown, which will begin to be eased from March 8, at which point schools would be reopened. However, it was a fairly cautious path overall and the stay-at-home message will remain until March 29, at which point people will be able to gather in groups of up to 6 or 2 separate households outdoors. Golf will return on this date - a bit later than I’d hoped. Furthermore, it won’t be until April 12 at the earliest that non-essential retail and gyms could reopen, along with outdoor hospitality, while indoor mixing between households will have to wait until May 17 at the earliest. As we said at the top, all social restrictions are hoped to be abandoned by June 21st just as the nights slowly start to get darker again!!

Elsewhere in Europe, the direction of travel seemed to be towards tougher restrictions, with Italy announcing an extension of travel curbs between regions until March 27, and authorities in France announced a lockdown for the next two weekends in Nice. Separately, Bloomberg reported that the German government were considering a further €50bn in debt spending, or around 1.5% of GDP, with the report saying that finance minister Scholz would propose suspending the constitutional debt brake for a third year. Speaking of Germany, the Ifo’s latest business climate indicator rose to a stronger-than-expected 92.4 in February (vs. 90.5 expected). That’s a 4-month high and was supported by the expectations measure coming in at 94.2, which also beat expectations for a 91.7 reading.

In the US, the FDA announced that drugmakers would not have to undergo large efficacy trials on booster shots to combat the variants, if needed, and that they would instead be based on immunogenicity studies, where researchers give vaccines to people and then conduct lab tests to measure the immune response. This is similar to how the annual flu vaccine is tested and produced. Also on vaccines, Moderna got positive feedback from the US government to get more doses of its Covid-19 vaccine from each individual vial it produces. This could expand supplies, which continues to trail demand dramatically. In terms of restrictions, New York continues to ease curbs on businesses as theatres will be allowed to reopen in mid-March with reduced capacity. Meanwhile in Asia, Japan is planning to end the state of emergency in six prefectures including Osaka and Kyoto at the end of the month, a week earlier than planned.

To the day ahead, and the highlight will be the aforementioned appearance of Fed Chair Powell before the Senate Banking Committee. Otherwise, data releases from Europe include UK unemployment for December and the final Euro Area CPI reading for January, while from the US there’s the Conference Board’s consumer confidence indicator for February, the Richmond Fed’s manufacturing index for February and the FHFA house price index or December. Lastly, earnings releases include Home Depot, Medtronic and Intuit.