Futures, Yields Slide As Month-End Jitters Spread

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by Tyler Durden
Thursday, Mar 25, 2021 - 07:55 AM

US equity futures faded a modest overnight rebound on Thursday, ahead of data that is expected to show a small drop in weekly jobless claims after last week's surprise spike, while the tech-heavy Nasdaq looked set to stabilize after its latest 2% rollercoaster drop in the previous session. The dollar and 10Y yields were unchanged from Thursday's close, while oil turned lower after a rally spurred by the blockage of the Suez Canal fizzled. It wasn't clear what was the reason for the persistent late - and as of today, early - selloff, but increasingly many are speculating that the month-end rebalance by pensions is winning the battle, if not the war, against the quant buying we noted in "Month-End Set For Epic Clash Between Forced Pension Selling And Quant Buying."

At 730 a.m. ET, Dow e-minis were up 27 points, or 0.09%, S&P 500 e-minis were flat, and Nasdaq 100 e-minis were up 24 points, or 0.18%.

Among some early movers, shares of Nike fell 3.6% as the company risked a boycott in China over its practice of not sourcing cotton from the contentious Xinjiang region. Carnival Corp. rose from its worst three-day slump since November on prospects for the return of cruise-line operations. U.S.-listed shares of Baidu Inc, Alibaba Group Holding Ltd and JD.Com Inc were subdued after the U.S. securities regulator adopted measures that would kick foreign companies off stock exchanges if they do not comply with U.S. auditing standards.

Nasdaq 100 futures turned red after rising earlier, after a Wednesday rout which saw investors pile into energy names and dump growth stocks, as investors are mulling which sectors of the stock market are best-placed to benefit from faster growth, while monitoring the risks of higher inflation. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell laid out their positive assessments of the recovery with reminders that it still has a long way to go in a second day of Congressional testimony.

“The reflation trade will have further legs to run,” Lale Akoner, BNY Mellon Investment Management senior market strategist, said on Bloomberg TV. “We do see higher inflationary pressures building, higher interest rates and softer dollar to continue.”

Europe's Stoxx 600 index rebounded from a sharp drop at the open, and were last trading down -0.2% as concern over lockdown extensions and vaccine hiccups are keeping cyclical stocks on the back foot, with energy firms and banks among the biggest contributors to the slight loss on the Stoxx Europe 600 index. European travel stocks fall, with the Stoxx 600 Travel & Leisure index down as much as 1%, amid news on possible U.K. restrictions, U.S. cruising and an update from tour operator TUI. Carnival slides as much as 5.9% as U.S. regulators dampen hopes of a quicker resumption of cruising; TUI declines 3.7% as company reduces its summer capacity plan. Airlines were also weak as U.K. warns it may need to impose border restrictions on some European countries: British Airways-owner IAG down 2.4% at 10am U.K. time, Easyjet -1.7%, Ryanair -1.5%; Lufthansa -3.2%. Finally, U.K. pub stocks slumped as Prime Minister Boris Johnson says venues may choose to require proof of vaccination from customers: Marston’s -2.2%, Fuller Smith & Turner -1.2%, Wetherspoon -0.7%.

European Union leaders are expected to lay out plans for reopening their economies at a video conference summit later in the day. 

Earlier in the session, Asian stocks enjoyed their first advance in five sessions as investors snapped up cyclical stocks, with industrials and financials driving the advance in the MSCI Asia Pacific Index. Japanese shares were the biggest gainers, as the Topix rose more than 1% for its first gain of the week after Kuroda made some soothing noises on the BOJ buying ETFs. Banks and electronics makers boosted the nation’s shares, with Keyence contributing most to the benchmark’s gain after Goldman gave a bullish view of the factory automation sector. Philippine stocks rallied for a third day, ahead of the nation’s central bank’s decision after market close to keep its policy rates unchanged. India’s Sensex led losses among key regional gauges, amid renewed worries over a resurgence of coronavirus cases in the country. Hong Kong indexes underperformed, weighed down by tech stocks after U.S. regulators revived delisting threats, and Tencent’s earnings were seen as disappointing.

Japanese stocks notched their first gain of the week, as electronics makers and banks drove gains in the Topix. All sectors on the benchmark gauge gained on Thursday. Fast Retailing and Fanuc were the biggest contributors to the advance in the Nikkei 225 Stock Average, which ended a four-day losing streak. Equities climbed even after Japan said North Korea fired two ballistic missiles on Thursday, in breach of United Nations resolutions. The rise also defied a tech-driven rout in U.S. stocks Wednesday. Commodities-related stocks were strong after a ship grounded in the Suez Canal, blocking a key oil supply route. Biopharmaceutical company AnGes surged 15% after it confirmed the safety of a Covid-19 treatment candidate in a study. SoftBank Group slumped after reports of a U.S. Securities and Exchange Commission investigation into its trading activities, which the company said it had no knowledge of.

The Bank of Japan bought 71.3 billion yen ($655 million) of exchange-traded funds under its market-support program Wednesday, marking an increase from the 51.3 billion yen worth it had purchased in daily actions so far this year. The BOJ has said it will stop buying exchange-traded funds tracking the Nikkei 225 and purchase only Topix-linked funds from April 1. “The BOJ adjusting its ETF purchase program isn’t really a reason to sell-off, because by buying Topix-tracking ETFs, they’re still buying stocks that are on the Nikkei 225 too,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “That said, it’s unclear in what circumstances they will buy. It’s a little too soon to tell.” Summary

Emerging Market equities extended their longest losing streak since September, threatening to wipe out all of this year’s gains. MSCI’s developing-nation stock index dropped for a fifth day, led by declines from India to Brazil and China. Currencies also slid, with the Turkish lira heading for its worst four-day rout since August 2018. Meantime, the risk premium for emerging-market sovereign bonds narrowed to 353 basis points over U.S. Treasuries, according to data compiled by JPMorgan Chase & Co. Traders are taking a cautious approach to developing-nation assets as the dollar rebounds, oil prices weaken and U.S. Treasury yields tick ever higher. The market meltdown in Turkey is only adding to the volatility. “It doesn’t seem emerging markets can catch a break,” said Omotunde Lawal, the head of emerging-market corporate debt at Barings U.K. in London. “I think the direction of travel will be virus data determinant from here. We could see spreads widen a bit more, but not a cataclysmic widening.”

In a notable overnight development, Reuters reported that the SEC started an inquiry into the the blank-check company frenzy that’s gripping Wall Street.

In rates, Treasuries were back to within a basis point of Wednesday’s closing levels after paring losses incurred during Asia session amid choppiness in Chinese stocks. 10-year yield little changed at ~1.61% with bunds and gilts outperforming by 2bp-3bp; bunds are on track for a fifth straight advance, longest streak since October. Bunds led the move off the lows during European morning, outperforming Treasuries, where dealers are braced for 7-year note auction along with more Fedspeak. The $62b 7-year auction at 1pm ET concludes this week’s auction cycle, in which 2- and 5-year sales were well received. WI 7-year yield around 1.285% is above auction stops since January 2020 and ~9bp cheaper than last month’s, which tailed by more than 4bp.

In FX, the dollar drifted in a narrow range as Treasuries snapped a three-day run of gains before a sale of seven-year bonds. Commodity currencies such as the Australian and New Zealand dollars rose as risk appetite improved with gains in regional stocks. USD/JPY climbed as much as 0.4% on demand from Japanese importers amid Gotobi day flows and leveraged buying, traders said.

“Yield- sensitive JPY bears are watching over U.S. data today and the seven-year U.S. Treasury auction as a new rise in yields could see USD/JPY popping the top on new highs and making a run at the critical chart and psychological level of 110,” said Steen Jakobsen, chief investment officer at Saxo Bank

Exporters purchased the Aussie at lower levels for hedging obligations into the month- and quarter-end, according to a trader.

“Both Aussie and the dollar-yen pair are well-bid as risk sentiment improved as regional stocks are broadly higher,” said Takuya Kanda, general manager at Research Institute Ltd. in Tokyo. “The Aussie has been sold recently and market players are buying it back to adjust their sell positions.”

In commodities, WTI and Brent futures started the session on a softer footing and are hovering just off worst levels, following on from Asia’s overnight lead where oil slid. Fundamental factors for the fragility in prices could be derived down to fresh COVID lockdowns which are restoring concerns over demand for oil products. Adding to the ever-rising European infection rates, is the growing COVID rates in developing economies such as Brazil, and India, where on Wednesday the latter reported its highest one-day tally of new infections and deaths whilst finding a new “double mutant” variant. Despite the ongoing concerns over global demand, over in the supply side, the Suez Canal is still blocked which is potentially blocking 10 tankers carrying 13 million barrels of oil and hence the global supply of the commodity.

Elsewhere, Bitcoin fell as much as 4.7%, to the lowest in about two weeks. The fifth-day decline in the cryptocurrency is its longest stretch this year.

Looking at today's key events Investors will be looking at the seven-year Treasury note auction today to gauge the direction of bond yields. President Joe Biden will host his first formal news conference Thursday. Expected data include unemployment claims and GDP. Darden Restaurants is among companies reporting earnings

Market Snapshot

  • S&P 500 futures up 0.1% to 3,886.00
  • MXAP up 0.2% to 202.69
  • MXAPJ down 0.1% to 669.89
  • Nikkei up 1.1% to 28,729.88
  • Topix up 1.4% to 1,955.55
  • Hang Seng Index little changed at 27,899.61
  • Shanghai Composite down 0.1% to 3,363.59
  • Sensex down 0.8% to 48,772.06
  • Australia S&P/ASX 200 up 0.2% to 6,790.56
  • Kospi up 0.4% to 3,008.33
  • Brent futures down 1.2% to $63.64/bbl
  • Gold spot down 0.1% to $1,733.39
  • U.S. Dollar Index up 0.2% to 92.68
  • SXXP Index little changed at 423.31
  • German 10Y yield down 1 bp -0.37%
  • Euro little changed at $1.1816

Top Overnight News from Bloomberg

  • AstraZeneca Plc reported a slightly lower efficacy rate for its Covid-19 vaccine after the results of an American clinical trial were criticized as outdated, raising further questions over the embattled shot and potentially delaying its approval in the U.S.
  • An elite team is tackling the monumental challenge of freeing the massive container vessel that’s blocking the Suez Canal, as a backlog of ships continued to build up for a third day in what is arguably the world’s most important waterway.
  • The Swiss National Bank softened its language on the need to intervene in currency markets to protect the economy, while insisting the franc is still “highly valued.”
  • The U.K. economy could see a “rip roaring” recovery even if consumers spend just a bit of the additional savings they accumulated during the Covid crisis, according to Bank of England Chief Economist Andy Haldane.
  • Turkey’s sovereign wealth fund pulled off one more deal in the closing days before President Recep Tayyip Erdogan jolted investors by ousting the central bank’s governor.

A quick look at global markets courtesy of Newsquawk

Asian equity markets were choppy as the region attempted to shrug-off the weak handover from Wall St where risk appetite was sapped amid further chatter of tax hikes in which both Treasury Secretary Yellen and Democratic Senator Manchin voiced their support for corporate tax increases. In addition, month- and quarter-end flows were also being touted as a potential factor coming into prominence while the declines were led by underperformance in small caps and tech which escalated to an initial bloodbath among Hong Kong-listed tech giants. Nonetheless, ASX 200 (+0.2%) was kept afloat for most of the session by resilience in defensive sectors and after officials including RBA Deputy Governor Debelle continued to speak highly of the domestic economy. Nikkei 225 (+1.2%) coat tailed on favourable currency flows with exporters cheering USD/JPY’s attempt to reclaim the 109.00 handle and the KOSPI (+0.4%) swung between gains and losses following news that North Korea fired another two missiles which Japan suggested may have been ballistic missiles and would therefore be in violation of UN resolutions, although South Korea later referred to them as short-range projectiles. Hang Seng (-0.1%) and Shanghai Comp. (-0.1%) were pressured at the open with a slump seen in the large tech names including Alibaba, Xiaomi, and Tencent following the US tech rout and amid delisting fears after the SEC recently adopted measures which could boot foreign companies off US exchanges if they do not comply with auditing standards. This dragged all components of the Hang Seng TECH Index into the red at early trade, while the recent China Q1 Beige Book was also tepid in which it noted that the service sector improved only marginally which is a sign consumption remains weak and a reason to remain cautious, although Chinese markets eventually rebounded from most the earlier losses. Finally, 10yr JGBs were softer amid a pullback in USTs and with demand sapped as Japanese stocks outperformed their regional peers, while the 40yr JGB auction provided some mild support as the results showed a relatively stable b/c and higher accepted prices.

Top Asian News

  • Philippines Holds Rates as Recovery Concerns Trump Inflation
  • Turkish Wealth Fund Clinched Loan Deal in Last Days of Agbal Era
  • Amazon’s Clean Energy Provider in Singapore Said to Weigh IPO
  • Samsung Unveils Next-Gen Memory for Data-Hungry AI and Computers

European stocks see somewhat of a choppy session within tight ranges (Euro Stoxx 50 -0.3%) after a similar tone was observed in APAC hours, with news flow again on the lighter side ahead of a myriad of central bank speakers and heading into month/quarter-end. On that note, BofA estimates that US private pensions will be needing equity-to-bond flows of some USD 88bbln, whilst JPM estimates balanced mutual funds to sell USD 136bln of equities and drop the money into fixed income. US equity futures have been consolidating following yesterday’s declines, with the tech-led NQ (+0.3%) narrowly outperforming. Sectors in Europe, however, portray more of a defensive bias, with a firmer performance seen across Staples, Healthcare, Telecoms, and Utilities, whilst value/cyclical sectors lag. Oil & Gas reside as the laggard amid the overnight decline in oil prices. Travel & Leisure continues to feel jitters over the worsening COVID situation in Europe. Further for the travel sector, the US CDC yesterday ordered the limit on US cruises to stay in effect until November 1st, thus Carnival (-3.8%) shares are plumbing the depths. In terms of individual movers, Adidas (-3.6%) is lower as its peer Nike (-3.5% pre-mkt) is facing backlash in China after they expressed concern about the alleged use of forced Uighur labour in the production of Xinjiang cotton, with H&M (-3.0%) also caught in the crosshairs. AstraZeneca (+0.5%) opened firmer as its amended Phase 3 results showed vaccine efficacy essentially unchanged. Siemens Healthineers (-1.4%) trades lower but trades off worst levels after announcing a share placement at a discounted price of USD 44.10/shr for some EUR 2.34bln.

Top European News

  • Commerzbank Leadership Crisis Deepens as Schmitz Resigns
  • Cineworld Gets New Lending, Eyeing Perilous Path Post- Covid
  • BOE’s Chief Economist Says ‘Rip Roaring’ Recovery Is Possible
  • Boohoo Cuts U.K. Suppliers as Part of Cleanup Efforts

In FX, contrasting fortunes for the Aussie, Kiwi and Yen as the Greenback continues to grind higher, with the Antipodeans deriving some traction from a rebound in APAC bond yields, but the latter losing more of its recent bullish momentum to suggest that Japanese buyers may have completed the bulk of their hedging and positioning for the turn of the month, quarter and financial year. Aud/Usd is keeping in touch with 0.7600 and Nzd/Usd is holding above 0.6950, while the Aud/Nzd cross pivots 1.0900 and Usd/Jpy breaches 109.00 eyeing several peaks that stand in the way of the y-t-d high from March 15 around 109.37. However, even if offers that were said to be sitting circa 109.30 have been withdrawn, the Yen could find solace via decent option expiry interest residing between 109.25-30 (1.5 bn) ahead of the NY cut.

  • USD/EUR/GBP - Notwithstanding the outperformance or resilience noted down under, the Buck remains on a firm footing and in DXY terms building a more solid platform above 92.500 to expose loftier multi-month targets above the 200 DMA, like 92.727, 92.804 and 92.847 dating back to November 19, 23 and 16 respectively. Conversely, the Euro is relying on a combination of option-related bids and sentimentality to maintain 1.1800+ status given 1.5 bn rolling off at the strike, while Sterling seems mainly dependent on chart support below 1.3700 as February 5’s circa 1.3658 low is the only level offering cover into 1.3650 and Fib retracements under the half round number.
  • CAD/CHF - The Loonie has drifted back down after probing 1.2550 vs its US counterpart yesterday in line with slippage in oil prices and the Franc is broadly flat following the SNB’s latest quarterly policy review that left all key policy settings and stances unchanged, as widely expected, but came with CPI upgrades, a relatively positive economic assessment for the 2nd half of 2021 and a change in the level of currency intervention to a willingness as and when required from ‘more’ strongly last December. Usd/Chf is hovering towards the base of a 0.9376-51 range and Eur/Chf nearer 1.1050 than 1.1070.

In commodities, WTI and Brent front month futures have started the session on a softer footing and are hovering just off worst levels, following on from Asia’s overnight lead where oil slid. On this, fundamental factors for the fragility in prices could be derived down to fresh COVID lockdowns which are restoring concerns over demand for oil products. Furthermore, adding to the ever-rising European infection rates, is the growing COVID rates in developing economies such as Brazil, and India, where on Wednesday the latter reported its highest one-day tally of new infections and deaths whilst finding a new “double mutant” variant. Despite the ongoing concerns over global demand, over in the supply side, the Suez Canal is still blocked which is potentially blocking 10 tankers carrying 13 million barrels of oil and hence the global supply of the commodity. Leading on from this, sources state the tanker may not be removed until Sunday which could create further constraints and filter through into oil prices. WTI May trades just above the USD 60.00/bbl handle (vs high 60.86/bbl) whilst its Brent counterpart trades marginally above USD 63.50/bbl (vs high 64.19/bbl). Looking ahead to notable risk events on the table include possible JMMC & OPEC+ source reports ahead of their meeting next week. As a reminder, yesterday OPEC+ sources that expectations are growing OPEC+ will rollover their current supply curbs into May. Reason for caution includes fresh lockdowns around the world alongside rising Iranian exports. However, this may be easier said than done as unanimity is needed for the final decision. Elsewhere, US GDP Final, US Initial Jobless Claims & US President Biden press conference are events to keep an eye on. Separately, spot gold and silver are both softer on the session which could be in the large part down to the stronger Dollar. However, it is worth noting overnight spot silver slipped to a two-week low, but gold inched higher due to the rising cases across Europe prompting some safe-haven flows, but gains were capped due to the Dollar hitting a fresh four-month high. Spot gold remains just above USD 1,730/oz (vs high USD 1,738/oz) and spot silver is marginally below USD 25/oz (vs high USD 25.16). Moving onto base metals, LME copper follows the softer sentiment and resides in the red and trading around USD 8,770/t. Dalian iron ore has risen for a third consecutive session amid an increase in demand and tight global supply, with the supply constraints linked to flooding in top exporter Australia, and the Suez Canal blockade.

US Event Calendar

  • 8:30am: March Initial Jobless Claims, est. 730,000, prior 770,000; Continuing Claims, est. 4m, prior 4.12m
  • 8:30am: 4Q GDP Price Index, est. 2.1%, prior 2.1%; 4Q PCE Core QoQ, est. 1.4%, prior 1.4%
  • 8:30am: 4Q GDP Annualized QoQ, est. 4.1%, prior 4.1%; Personal Consumption, est. 2.4%, prior 2.4%
  • 9:45am: March Langer Consumer Comfort, prior 48.6
  • 11am: March Kansas City Fed Manf. Activity, est. 26, prior 24

Central Bank Speakers

  • 10:10am: Fed’s Clarida Speaks on Outlook for Economy and Monetary...
  • 12pm: Fed’s Bostic Gives Speech to Economic Club of New York
  • 1pm: Fed’s Evans Discuses the Economic Outlook
  • 1pm: ECB’s Schnabel in Fireside Chat at NY Stern Online Series
  • 7pm: Fed’s Daly Discusses Monetary Policy

DB's Jim Reid concludes the overnight wrap

Risk assets gained ground for most of yesterday following the release of strong flash PMI readings, but a late sell-off in US tech created a weak close with the S&P 500 losing -0.55%. US Energy companies (+2.52%) outperformed on the back of higher oil prices, along with other cyclical sectors including industrials (+0.73%), materials (+0.69%) and financials (+0.44%). However, many of the beneficiaries from the stay-at-home trade suffered, as the NSYE FANG+ index of megacap tech stocks fell -3.17%. Stocks such as Peloton (-10.2%), DocuSign (-4.6%) and Zoom (-7.3%) were among the worst performers in tech. There was no clear catalyst for the selloff, but the strong PMI numbers did seem to restart the rotation trade from growth to cyclicals.

The reopening trade also took a bit of a late hit though on news that the CDC is planning a more phased reopening for the cruise line industry this summer rather than a quick restart. This caused cruise operators such as Carnival (-1.7%), Royal Caribbean (-2.8%) and Norwegian Cruise Line (-4.9%) to fall sharply, but other cyclicals also put in their intraday highs just prior to this announcement.

It was all going well for risk with PMIs providing fresh impetus to the reflation trade. They generally came in much stronger than expected and also showed that inflationary pressures remained strong, with numerous price gauges at their highest in years. Looking at the headline numbers, the Euro Area composite PMI rose to an 8-month high of 52.5 (vs. 49.1 expected), which brought an end to a 4-month run when it had been in contractionary territory. Manufacturing in particular was incredibly strong, with the Euro Area manufacturing PMI climbing to an all-time high of 62.4 (vs. 57.6 expected), while services also outpaced expectations at 48.8 (vs. 46.0 expected). Records were being set in Germany too, with their manufacturing PMI at a record 66.6 (vs. 60.5 expected), and with the services number advancing back into expansionary territory at 50.8 (vs. 46.5 expected). German manufacturing input prices rose another 6.2 points to 84.5, just short of their all-time highs of 88.0 from Feb 2011.

Over in the US the numbers were a little more subdued, but the services PMI still rose to 60.0 (vs. 60.1 expected), its highest in more than 6 years, while the manufacturing PMI matched the second fastest level since 2007 of 59.0 (vs. 59.5 expected). The US composite gauge of prices paid and received rose to new records as supply shortages and supply chain issues lead to inflation worries. Input prices exceeded prices charged by double digits for the second time since the data started being tracked in 2009, which suggests there is pressure on margins.

The release of the European numbers shortly after the open proved strongly supportive for equities on the continent, with the STOXX 600 paring back its initial losses (when it hit an intraday low of -0.70%) to close flat (+0.02%) and just off its highs of the day. This was before the bulk of the US sell-off. Meanwhile, 10yr US Treasury yields also moved higher on the back of the releases, though yields then fell back following the CDC guidance for a slower reopening before ending the day down -1.2bps to 1.608%. The move lower was driven by real yields falling back (-2.5bps) even as inflation expectations rose +1.3bps. The 7 year auction today will be a big focus especially since last month’s equivalent saw poor demand and seemed to help further precipitate the sell-off. Ahead of this European yields also moved slightly lower yesterday, with 10yr bunds (-1.2bps), OATs (-1.6bps) and BTPs (-1.1bps) all seeing declines.

In their second day testifying before Congress, Treasury Secretary Yellen and Federal Reserve Chair Powell reaffirmed that while the economy is healing there is a long way still to go. Chair Powell said that the government had avoided the worst outcomes of the pandemic with the aggressive spending policies and low interest rate environment of the past year. Secretary Yellen acknowledged that while it was “appropriate” to expand deficit spending to deal with the effects of the recession, “longer-run, we do have to raise revenue to support permanent spending that we want to do.” On inflation, Chair Powell continues to push back on the narrative that the Fed could find itself behind the curve saying, “the inflation dynamics that we’ve seen around the world for a quarter-century are essentially intact — we’ve got a world that’s short of demand, with very low inflation… those dynamics haven’t gone away overnight, and won’t.”

Elsewhere in markets, one of the biggest pieces of news over the last 24 hours has been the blockage in the Suez Canal, which has sent oil prices soaring in response, with both Brent Crude (+5.95%) and WTI (+5.92%) seeing their largest daily rises so far this year. That’s still puts them around -7.5% off their peaks from 2 weeks ago. We referenced the blockage briefly yesterday but the issue was caused by the Ever Given container ship running aground, and thus blocking the route through which 12% of global trade passes. For perspective, the ship is 400m long, which puts it somewhere between the height of the Eiffel Tower (324m to the tip) and the Empire State Building (443m to the tip). Work to remove the 200k ton vessel was paused overnight with SMIT Salvage, a Dutch firm that specialises in ship wreckages, being called in to assess the situation. Bloomberg has cited Nick Sloane, the salvage master responsible for refloating the Costa Concordia, the cruise ship that capsized on the coast of Italy in 2012, as saying that the best chance for freeing the ship may not come until Sunday or Monday, when the tide will reach a peak. The current low tide is slowing the work to clear the ship.

Overnight in Asia, markets are mostly trading higher with the Nikkei (+1.14%), Hang Seng (+0.26%), Shanghai Comp (+0.21%) and Kospi (+0.33%) all making gains. Futures on the S&P 500 are up +0.30% and those on the Nasdaq are up +0.28% but European ones are pointing to a weaker open as they try to catch up with yesterday’s late selloff in US equities. 10y USTs are up +1.1bps to 1.622% driven by a rise in real yields. New Zealand’s 10y yields are up +5.5bps and Australia’s +2.6bps while those on 10y JGBs are up +1.4bps. Elsewhere, WTI (-1.77%) and Brent (-1.44%) crude oil prices are giving up some of yesterday’s gains.

In other overnight news, Reuters reported that the US SEC has started an inquiry into the SPAC IPO space by asking for voluntary information. The inquiry which is currently not at the level of a formal investigation is focused on how the underwriter banks are managing the risks involved with the SEC asking for information on deal fees, volumes and internal controls to police deals and asking questions on compliance and reporting. Reuters report also added that the SEC concerns may be centred around due diligence and the heightened risk of insider trading when a SPAC goes public and when it announces an acquisition target.

On the pandemic, yesterday saw the EU announce tougher proposals to restrict vaccine exports, with new regulations that would require member states to consider both reciprocity and proportionality when exporting. In other words, they would have to take into account whether the other country were restricting their own exports of vaccines or raw materials, as well as the virus situation in the export destination country and its vaccination rates. The UK could stand to be one of the major losers, since its own vaccination rollout is significantly ahead of the EU’s, yet it’s reliant on the EU for the import of vaccine doses. EU leaders will be meeting via videoconference later today and tomorrow, where the pandemic and the vaccination rollout are at the top of the agenda, and as it happens, US President Biden is due to join in with the gathering tonight for a discussion on transatlantic relations.

Continuing with vaccines, AstraZeneca reported a slight lower efficacy rate for its vaccine overnight after the results of an American clinical trial were criticised as outdated by the DSMB. The company said in a statement that its shot was 76% effective in its US trial based on the latest data as against the previously stated efficacy rate of 79%. Meanwhile, AZ maintained that its vaccine protected all volunteers against developing severe disease or requiring hospitalisation. The company added that they will now file an application for emergency use authorization in the US and are “preparing for the rollout of millions of doses across America.”

The other big news on the pandemic was that Germany dropped a plan for a 5-day lockdown over Easter, with Chancellor Merkel describing the move as a “mistake”. However, the numbers continued to rise in multiple European countries, with Poland reporting a record number of cases yesterday, whilst Belgium announced schools would shut a week early, and that the limit on outdoor gatherings would go down to 4, from 10 at present. Iceland, viewed as a nation that has handled the pandemic well, also tightened restrictions for the next three weeks as infections rose linked to the UK variant. In the US, three more states (Utah, Idaho and Louisiana) have expanded vaccine eligibility to all adults in the coming weeks in an effort to ensure that all those who want the jab can get it as quickly as possible. Restrictions were relaxed in Colorado, one of the largest states where many curbs on dining and personal gatherings remained in place.

As well as the PMIs, yesterday’s data included the preliminary release of February’s durable goods orders in the US, which unexpectedly fell by -1.1% (vs. +0.5% expected), marking the first monthly decline since April last year. Meanwhile the UK’s CPI inflation reading also fell unexpectedly to +0.4% (vs. +0.8% expected), as core inflation also fell back to +0.9% (vs. +1.4% expected).

To the day ahead now and there are an array of central bank speakers, including ECB President Lagarde and BoE Governor Bailey, along with the ECB’s de Guindos, Weidmann, Villeroy and Schnabel, and the Fed’s Williams, Clarida, Bostic, Evans and Daly. On top of that, the ECB will be releasing their latest Economic Bulletin. The data highlights include the weekly initial jobless claims from the US, along with the third estimate of Q4’s GDP, while in Europe we’ve got the Euro Area’s M3 money supply for February and France’s business confidence for March. Finally, EU leaders will be meeting via videoconference later today.