US Futures, Global Stocks Hit Fresh All Time High

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by Tyler Durden
Friday, Apr 16, 2021 - 07:46 AM

US equity futures and global stocks rose to new record highs and oil climbed after strong U.S. and Chinese economic data bolstered expectations of a solid global recovery from the covid pandemic. At 7:00 a.m. ET, Dow e-minis were up 34 points, or 0.1%, S&P 500 e-minis were up 5 points, or 0.11% to a new all time high of 4,167, and Nasdaq 100 e-minis erased a decline of as much as 0.4% to trade little changed as of 7:20am in New York.

The benchmark S&P 500 and the blue-chip Dow are on course for their fourth straight week of gains, while the Nasdaq is less than a percent below its own all-time peak despite some turbulence last month. With the first-quarter corporate earnings season under way, focus will be on results from Morgan Stanley after bumper earnings earlier this week from JPMorgan, Goldman and Bank of America that reinforced hopes of a swift economic rebound. Oil companies, mainly Chevron Corp, Marathon Petroleum, Exxon Mobil Corp and Occidental Petroleum, gained between 0.3% and 1.1% as oil prices rose.

“As the economic reopening accelerates in the coming months, we believe the bull market remains on a solid footing,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “We maintain a cyclical bias and prefer U.S. consumer discretionary, energy, financials and industrials.”

In the U.S., Thursday’s retail sales and weekly jobless claims data signaled an accelerating recovery in the world’s biggest economy. Investors will look for further confirmation as the reporting season picks up pace next week, with around 80 S&P 500 members and more than 50 Stoxx 600 firms announcing.

Looking at global markets, MSCI’s broadest gauge of world stocks edged higher in early European trade, up 0.2% to a record high. Europe’s top indexes all opened higher, led by Britain’s FTSE 100, up 0.5% and passing 7,000 points for the first time since February 2020.

“As the global recovery becomes more entrenched, fuelled by continued fiscal stimulus and ultra-loose monetary policy, we think this should translate into continued positive UK equity market performance,” said Nick Peters, multi asset portfolio manager, Fidelity International.

The Stoxx Europe 600 Index was poised for a seventh week of advances, its longest streak since May 2018, as investors continued to boost cyclicals such as carmakers and banks, while defensive sectors lagged. The Stoxx 600 benchmark index rose 0.6%, pushing further into record-high territory, with economically sensitive sectors leading gains. European cyclicals outperformed while all 20 sector groups positive: Automotives +2.2%, banks +1.6%, industrials +0.9%; consumer products & services, health care sectors up by less than 0.1%

Here are some of the biggest European movers today:

  • Bank of Ireland Group shares jump as much as 7.9%. KBC signed a memo with Bank of Ireland agreeing to “explore a route” to sell “substantially all of KBC Bank Ireland’s performing loan assets and liabilities,” the pair said in a joint statement Friday.
  • Kesko shares rise as much as 6.6% after upgrading its 2021 guidance late on Thursday. Inderes raised its recommendation on the Finnish retailer to accumulate, saying the company is “rewriting records once again.”
  • WH Smith shares gain as much as 5.3% as RBC upgraded the stock to outperform and increased the price target. The broker said in a note that the retailer’s international businesses are providing an encouraging precedent for a recovery in U.K. travel demand.
  • HelloFresh shares surge as much as 8.4% with Deutsche Bank saying the meal-kit maker’s 1Q results were a “massive beat” after the firm raised its FY guidance.
  • CD Projekt shares decline as much as 4.2% after preliminary earnings unexpectedly released late on Thursday and indicated lower-than-consensus estimate sales for Cyberpunk 2077. Patria said investors will be worried about weak preliminary sales and net income numbers.
  • L’Oreal shares slipped as much as 3.2% as the French beauty-products maker’s 10% beat in its 1Q organic-sales growth wasn’t enough to propel higher a stock trading around record levels.
  • Evolution shares drop as much as 2.6% after being downgraded to hold at DNB. While the company faces an “impressive” 1Q, near-term catalysts seem mostly priced in, the broker said in a note.

The latest data from Beijing which saw China's GDP rise by a record 18.3%  (although the growth rate slowed substantially Q/Q) to Thursday’s string of positive economic figures out of the U.S., boosting futures on the small-cap Russell 2000 and Dow Jones Industrial Average indexes.

Overnight, Asian stocks tracked a path similar to Europe’s. MSCI’s broadest index of Asia-Pacific shares outside Japan was last up 0.5%, with Shanghai shares adding 0.8% and Japan’s Nikkei up 0.1%. Driving the move was Chinese data showing record 18.3% growth in the first quarter, though the reading slightly undershot expectations. Retail sales were the only real-time print that beat expectations (see more here).

Asian stocks reversed an earlier loss, as data showing that China’s economy expanded by a record in the first quarter boosted investor sentiment. Hong Kong-listed Tencent and Meituan were the biggest boosts to the MSCI Asia Pacific Index, which was on track for a weekly gain of 1.1%, its biggest in about two months. TSMC was the biggest drag as analysts pointed to profit-margin pressure from its increased spending plan. The tech sector could be active next week, with events including Apple’s first product unveiling of the year as well as earnings from Intel and Japanese electronic components maker Nidec. Stocks in Hong Kong and China turned higher after China’s GDP data, helping the CSI 300 Index close just above its 200-day moving average. The economy grew 18.3% in the first quarter from a year earlier, largely in line with estimates. The nation’s retail sales beat expectations while industrial output moderated. Equity benchmarks in the Philippines and Vietnam fell, while those in India and Japan were sluggish amid renewed surges in coronavirus infections.

Chinese stocks rose on the strength of liquor producers and car manufacturers, after government figures showed consumer spending strengthened in the first quarter to make economic recovery more balanced. The benchmark CSI 300 Index closed 0.4% higher after sliding earlier in the session. Baijiu distillers including Kweichow Moutai and Wuliangye Yibin were the biggest contributors to the gauge while Changan Auto and Guangzhou Auto were the top performers. The Hang Seng Index ended 0.6% stronger. The National Bureau of Statistics announced that China’s gross domestic product climbed 18.3% year on year in the first quarter, compared with consensus of 18.5%. Retail sales beat expectations while industrial output moderated. Consumption of auto products surged 65.6% in the period from a year ago, out-pacing a 33.9% jump in overall retail sales. Investors beefed up buying in afternoon trading via the stock connect programs between the mainland and Hong Kong, said Daniel So, a CMB International strategist. “One of the reading into the economic data is that the central bank may slow down its pace to tighten the liquidity in the market, after the growth came in slightly below estimates.”  Net purchase of mainland stocks via the trading links exceeded 7.1 billion yuan on Friday, the second biggest in almost four weeks. That took the weekly total to the most since Feb. 5, according to Bloomberg-compiled data. The CSI 300 Index declined 1.4% for the week. It still held above its 200-day moving average, a key support level.

“We remain focused on a China-led rebound steadily helping the Asia-Pacific region,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. “As the U.S. economy and then European economies open up, it should further help Asian exports. This should support Emerging Market and APAC equities as well as China equities and fixed income.”

In rates, Treasuries held onto Thursday’s gain, with traders suggesting foreign buying and geopolitical risks may have contributed to the advance. The 10-year U.S. Treasuries yield was last at 1.55%. Long-end yields are richer by 3bp on the day, flattening the curve. Treasuries faced pressure during Asia session from double block sale in 5-and 10-year futures; bunds and gilts underperform. The curve flattened from belly out to long-end, 2s10s by less than 1bp, 5s30s by ~1bp; 10-year yield around 1.57% is ~1bp lower on the day, outperforming bunds by ~2bp, gilts by ~3bp. Dollar issuance slate empty so far; nearly $24b was priced Thursday, including biggest-ever bank offering by JPMorgan ($13b 5-part), as well as by Goldman Sachs ($6b) and Tencent ($4.15b)

“As the economic reopening accelerates in the coming months, we believe the bull market remains on a solid footing,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “We maintain a cyclical bias and prefer U.S. consumer discretionary, energy, financials and industrials.”

In FX, the Bloomberg Dollar Spot Index was little changed, after falling for four consecutive days, and the greenback traded mixed against its G-10 peers; Treasuries outperformed European government bonds. The euro approached $1.20 before paring gains as it gravitated toward the 55-DMA. The pound hit its weakest against the euro since February, unwinding the premium from the U.K.’s speedy vaccination program earlier this year. The yen edged lower for the first time in five sessions as traders adjusted their positions ahead of the meeting between President Joe Biden and Prime Minister Yoshihide Suga. Australian and New Zealand dollars eased against the greenback as short-term accounts trimmed existing longs; the currencies are poised for their biggest weekly gains since November, buoyed by rising commodity prices and a falling Treasury yields.

In commodities, oil hit a one-month highs thanks to the economic data and higher demand forecasts from the International Energy Agency (IEA) and OPEC, Oil headed for the biggest weekly gain since early March on optimism the recovery in demand from the Covid-19 pandemic is improving. Brent futures were last flat at $66.94 per barrel. U.S. crude was down 0.1% at $63.4 per barrel, both on course for their first substantial weekly gains in six.

Elsewhere, copper remained on course for the best week in about two months. Bitcoin slipped.

Bitcoin tumbled after Turkey banned the cryptocurrency.

Looking at the day ahead now, the data highlights include US housing starts and building permits for March, along with the preliminary University of Michigan consumer sentiment index for April. Meanwhile in Europe, there’s the new EU car registrations for March and the final Euro Area CPI reading for that month as well. Otherwise, central bank speakers include Dallas Fed President Kaplan and BoE Deputy Governor Cunliffe, and earnings releases include Morgan Stanley and BNY Mellon.

Market Snapshot

  • S&P 500 futures +0.1% at 4,167.75
  • MXAP up 0.3% to 208.61
  • MXAPJ up 0.5% to 695.84
  • Nikkei up 0.1% to 29,683.37
  • Topix little changed at 1,960.87
  • Hang Seng Index up 0.6% to 28,969.71
  • Shanghai Composite up 0.8% to 3,426.62
  • Sensex up 0.1% to 48,873.01
  • Australia S&P/ASX 200 little changed at 7,063.45
  • Kospi up 0.1% to 3,198.62
  • Brent Futures up 0.3% to $67.12/bbl
  • Gold spot up 0.2% to $1,767.31
  • STOXX Europe 600 up 0.3% to 439.92
  • German 10Y yield rose 2.3 bps to -0.268%
  • Euro up 0.1% to $1.1975
  • U.S. Dollar Index little changed at 91.626

Top Overnight News from Bloomberg

  • Hedge funds have been a major player in this year’s Treasury selloff, offloading more than $100 billion of the securities since the start of January, according to holdings data
  • Brevan Howard Asset Management is preparing to start investing in digital assets, becoming the latest money manager seeking to exploit the cryptocurrency boom
  • China’s economy soared in the first quarter as consumer spending strengthened, suggesting a more balanced recovery after an investment and export-fueled rebound from last year’s coronavirus lockdowns. GDP climbed a record 18.3% in the first quarter from a year earlier, largely in line with the 18.5% predicted in a Bloomberg survey of economists
  • Man Group Plc assets hit yet another record as investors kept pouring money into its funds, signaling a pickup in its business and the wider hedge fund industry. The world’s largest publicly-traded hedge fund firm raked in $600 million of cash in the first quarter that lifted assets under management to $127 billion, the company said in a statement Friday
  • The EU “most probably” won’t renew its coronavirus vaccine contracts with AstraZeneca and Johnson & Johnson, French Industry Minister Agnes Pannier-Runacher said on BFM TV on Friday

A quick look at global markets courtesy of Newsquawk

Asian equity markets traded cautiously after the mild tailwinds from US, where most major indices notched fresh record highs and tech outperformed amid a decline in yields and surge in Retail Sales, gradually dissipated as the region digested a miss on Chinese GDP and Industrial Production data. ASX 200 (Unch.) was subdued after the disappointing data from Australia’s largest trading partner with sentiment also dampened by underperformance in energy and the top-weighted financials sector, while Nikkei 225 (+0.1%) was indecisive with concerns of widening COVID-19 measures counterbalanced by a more favourable currency. Hang Seng (+0.6%) and Shanghai Comp. (+0.8%) were choppy following the latest economic growth and activity data from China in which GDP and Industrial Production disappointed although still showed a double-digit percentage surge Y/Y and Retail Sales surpassed estimates to suggest a strong domestic consumer profile, while the stats bureau also suggested the economy got off to a good start with continued improvement to production and demand. Finally, 10yr JGBs retraced some of yesterday’s after hours gains as the recent bull flattening and short-covering in USTs lost steam, while the indecisive risk tone and lack of purchases by the BoJ in the market today also constrained price action. PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position.

Top Asian News

  • Normal Monsoon in India May Spur Growth of Virus-Ravaged Economy
  • Singapore Air to Stop Flying Transit Passengers to Hong Kong
  • Final Fantasy Maker Jumps on Report It May Be Acquisition Target
  • Distressed Firm Sritex Is Said to Pause Dollar Loan Payments

European equities trade somewhat mixed with an upside bias as the core bourses edge higher in early European trade (Euro Stoxx 50 +0.5%) following somewhat of a lukewarm cash open, with newsflow again on the lighter side. Stateside, US equity futures see sideways trade as participants look ahead to another wave of earnings, with Morgan Stanley among the bunch. Back to Europe, The FTSE 100 (+0.5%) was initially the leader amid favourable Sterling dynamics, but Germany’s DAX (+0.7%) now outpaces peers as Daimler (+2.5%) leads the gains following a significant beat in Q1 EBIT - led by favourable sales momentum by all major regions and particularly in China. Separately, Co. unveiled the electric version of its Mercedes-Benz S-Class sedan poised for sale from August and billed as a competitor to Tesla. This, alongside an almost 90% Y/Y increase in EZ New Car Registrations, sees the Auto sector as the clear outperformer closely followed by financials amid the higher yield environment. The other end of the spectrum sees Consumer Staples, Healthcare and Tech. Overall, sectors are mixed with no clear overarching theme. In terms of individual movers, L’Oreal (-2.0%) shares are pressure post-earnings amid a Q1 revenue miss.

Top European News

  • Merkel Pleads for More Control to Break Third Pandemic Wave
  • U.K. Lobbying Scandal Deepens as Hancock Accused of ‘Cronyism’
  • Stirling Square Is Said to Weigh IPO of Sweden’s Byggfakta Group
  • Hungary Regulator Suspends OTT-One Shares After Auditor Resigns

In FX, sterling has pared some losses, but remains under pressure amidst the ongoing dispute between the UK and EU over NI protocol compliance, with some progress made at a meeting between Frost and Sefcovic, but difficult issues still to be resolved according to the former. Meanwhile, Cable succumbed to sell orders when a key pivot point was breached at 1.3760 and more following the loss of 1.3750 before finding some underlying bids ahead of 1.3700 and Eur/Gbp climbed to a fresh April peak after crossing 0.8700 and is now eyeing a late February apex at 0.8731 vs 0.8719, thus far.

  • USD - Aside from Pound weakness, the Dollar has regained some yield attraction, though not across the board by any means as the DXY straddles its own former technical axis around 91.740 within a 91.813-574 range against the backdrop of buoyant risk sentiment that has seen certain EU stock indices emulate their Wall Street peers to trade at record levels, like the Dax. Ahead, US housing data and another regional survey, but this time in the form of prelim Michigan sentiment.
  • CHF/CAD/EUR - The Franc is outperforming through 0.9200 vs the Greenback and closer to 1.1000 against the Euro than 1.1050 in wake of Swiss producer/import price data showing a 0.6% m/m rise that pushed the y/y rate up to -0.2% from -1.1% previously, while the Loonie seems to be latching on to mostly firmer oil prices following yesterday’s weaker than expected Canadian manufacturing sales as it rebounds from sub-1.2550 lows towards 1.2500 in the run up to securities purchases and wholesale trade. Elsewhere, the Euro continues to hold above 1.1950 and stay capped beneath 1.2000 where bids and offers presumably lie in decent size, though without anything of note in terms of option expiries today.
  • JPY/AUD/NZD - All softer vs their US counterpart, or handing back some gains to be more precise with the Yen now nearer 109.00 following a 2nd unsuccessful attempt to pierce 108.60, Aussie back below 0.7750 after even more efforts to break above and Kiwi hovering just over 0.7150 vs a circa double top around 0.7180. Note, Aud/Usd failed to derive momentum from a raft of Chinese data as GDP and IP missed admittedly lofty expectations in contrast to retail sales, while Nzd/Usd also gleaned little lasting benefit from an acceleration in NZ’s manufacturing PMI and Usd/Jpy shrugged off strength in Reuters’ Japanese Tankan Manufacturing Index.
  • EM - A seemingly conciliatory tone from US President Biden in the context of strained relations with Russia and Brent peering over Usd 67/brl has helped the ravaged Rub recover losses to 75.3340 at one stage from 76.4800+, but the Try remains beneath 8.0000 irrespective of Turkey raising corporate tax to 25% from 20% and the Cnh is flat on the day around 6.5200, though not far from w-t-d highs on the back of a firmer PBoC Cny midpoint fix overnight.

In commodities, WTI and Brent front month futures yet again experience a choppy European morning, as the contract fails to clinch onto a narrative amid slow news flow. Meanwhile, participants attempt to gauge the supply/demand scales as COVID cases remain elevated, some vaccines are halted, and the geopolitical landscape tense on several fronts. However, supportive omens have emanated from the bullish inventory data and constructive oil market reports throughout the week. WTI Jun around the 63.75/bbl mark (63.30-63.94 range) and its Brent counterpart just north of USD 67/bbl (66.75-67.36 range). Elsewhere, spot gold and silver were rangebound for a large part of the session amid after rising in unison with the recent drop in yields, although upside was seen in wake of reports that China has reportedly permitted banks to import large amounts of gold, around 150 tonnes of gold worth some USD 8.5bln in April and May, sources said, with spot gold around USD 1,770/oz and spot silver eyeing USD 26/oz to the upside. In terms of base metals, LME copper is waning off best levels with the miss in Chinese GDP and IP not supportive for sentiment surrounding the red metal, albeit prices reside comfortable north of USD 9,000/t. Meanwhile, the APAC session saw Dalian coking coal futures surge as safety inspections sparked supply concerns.

US Event Calendar

  • 8:30am: March Housing Starts est. 1.61m, prior 1.42m; MoM, est. 13.5%, prior -10.3%
  • 8:30am: March Building Permits, est. 1.75m, prior 1.68m, revised 1.72m; MoM, est. 1.7%, prior -10.8%, revised -8.8%
  • 10am: April U. of Mich. 1 Yr Inflation, est. 3.2%, prior 3.1%; 5-10 Yr Inflation, prior 2.8%
  • 10am: April U. of Mich. Current Conditions, est. 96.0, prior 93.0; Expectations, est. 85.0, prior 79.7; Sentiment, est. 89.0, prior 84.9

DB's Jim Reid concludes the overnight wrap

I feel truly blessed to be working today. The family are about to leave without me on a 2-hour trip to Thomas Land which is based on Thomas the Tank Engine. As with earlier this week it’s in a middle of a bigger Theme Park which looks even more frightening than the one I went to on Monday (around Peppa Pig World). So I will have Bronte curled up at my foot all day today while my wife curls up in a ball after too many rollercoasters.

Markets got back on the bullish train yesterday with both bond and equity markets performing as the decent data seemed to be already baked into bond markets (a bit like with CPI a couple of days back) whilst the strong data and strong earnings boosted equities. A Goldilocks day if ever there was one. The -5.6bps rally in 10 year US yields caught the eye with the benchmark now trading -12.5bps lower than its intra-day day high on Tuesday. Most of the bond rally came after the strong retail sales/claims report that maybe didn’t blow the lights out as much as it could have done in some people’s eyes. There were some larger whisper numbers being flagged in recent days. The other explanation for the recent rally in US bonds has been renewed demand from Japanese investors after government data showed Japanese investors bought $15.6 billion of foreign bonds last week. This comes after insurers and banks in Japan contributed to a good deal of selling in February. Geopolitical risk rising was also cited. More on the retail data below but to quickly recap other key variables, the S&P 500 (+1.11%) advanced to its 7th all-time high so far this month, while the VIX index of volatility (-0.42pts) reached a new post-pandemic low, and the NYFANG index (+1.65%) saw its 13th increase in the last 14 days.

Running through the headlines from those US data releases, retail sales rose by a stronger-than-expected +9.8% in March (vs. +5.8% expected) as they marked their fastest monthly growth since last May. The gains were aided by the stimulus checks as well as a recovery from February’s bad weather, and February’s contraction was revised to show a smaller -2.7% decline (vs. -3.0% previously). There was also good news from the weekly initial jobless claims for the week through April 10, one of the timeliest indicators we get, which showed them falling to a post-pandemic low of 576k (vs. 700k expected), a number that was beneath every estimate on Bloomberg. Survey data from April was positive too, with the NY Fed’s Empire State manufacturing survey seeing the general business conditions index rise to 26.3 (vs. 20.0 expected), in the best reading since 2017. On the inflation front, notably the prices paid index rose to its highest level since 2008, and the prices received index hit a record high. Elsewhere the Philadelphia Fed’s Manufacturing Business Outlook Survey rose to 50.3, which was its highest level since April 1973. March Industrial production was the main disappointment and only rose by +1.4% (vs. +2.5% expected). Separately, the NAHB’s housing market index for March rose by 1 point to 83 as expected.

Global equities reacted very strongly to the data tailwind and with lower yields at their backs, and as mentioned the S&P 500 soared to a fresh record in a broad-based advance that saw more than 75% of the index move higher on the day. The Dow Jones (+.90%) similarly hit a fresh record, and at one point in trading breached the 34,000 mark for the first time. 22 of 24 S&P 500 industry groups were higher on the day, with the only laggards being two of the cyclical industries that outperformed in the first quarter of the year, namely energy (-0.88%) and banks (-0.88%). Health care equipment (+2.21%) and semiconductors (+2.27%) were at the other end of the spectrum, leading the S&P higher. The outperformance of technology stocks led the NASDAQ composite to gain +1.31% yesterday, taking the index to within half a per cent of its record close.

Meanwhile Europe’s STOXX 600 (+0.55%) and the German DAX (+0.30%) both climbed to their own all-time highs. The moves in 10yr Treasuries saw the lowest yield close in over a month, with real yields (-6.1bps) driving the decline though inflation expectations (-0.8bps) fell back a touch on as well. The moves were somewhat replicated in Europe, where yields on 10yr bunds (-3.2bps), OATs (-3.4bps) and BTPs (-6.3bps) all fell. Italian bond yields fell the most since March 11 after €15b of redemptions paid Thursday and are said to be prioritising borrowing plans rather than the country’s budget deficit. 10yr gilt yields fell back -6.7 bps to 0.74%, similarly marking the biggest drop since early-March.

Overnight in Asia, we have seen China‘s economic data dump for March with Q1 2021 GDP printing largely in line with expectations at +18.3% yoy (vs. +18.5% yoy expected). In terms of quarterly growth the latest print came at +0.6% qoq as against an upwardly revised reading of +3.2% qoq (prior reading +2.6% qoq) in the previous quarter. The GDP growth was supported by a strong rebound in industrial output and robust exports even as consumer spending continued to lag. Besides this we also saw March industrial production which printed at +14.1% yoy as against expectations of +18.0% yoy while retail sales came in strong at +34.2% yoy (vs. +28.0% expected). Meanwhile, YtD March fixed asset investments ex rural stood at +25.6% yoy (vs. +26.0% yoy expected) and the surveyed jobless rate for March printed at +5.3% yoy vs. +5.4% yoy expected.

Against the backdrop of a relatively strong Chinese data, Asian markets are mostly trading up with the Shanghai Comp (+0.46%) leading the gains while the Nikkei (+0.09%), Hang Seng (+0.11%) and Kospi (+0.14%) are also up. Elsewhere, futures on the S&P 500 are down -0.10% and those on the Nasdaq are down a larger -0.20%. US 10y treasury yields are trading flattish this morning.

Another major story yesterday was the imposition of new US sanctions on Russia, which saw the Ruble decline against all the other major currencies, including a -0.76% loss against the US dollar. The moves saw 10 Russian diplomats expelled from the US, sanctions placed on over 30 individuals and entities, along with restrictions placed on the Russian primary debt market from June 14 that would prevent US institutions participating in new debt issuance by the central bank, finance ministry and sovereign wealth fund. In a letter to Congress detailing the Executive Order, Biden said that Russia’s actions such as “efforts to undermine the conduct of free and fair democratic elections”, constituted “an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.”

Over in Germany, the race to be the CDU/CSU chancellor candidate is still ongoing ahead of September’s federal election, with both the CDU’s Armin Laschet and the CSU’s Markus Soeder remaining in the running. As mentioned earlier in the week, the issue is that normally the larger CDU decides the nominee, but their leader Laschet is less popular than the CSU’s Soeder, which has led to calls for him to be the candidate instead, particularly given their decline in the opinion polls over the last couple of months, with the party only a few points ahead of the second-placed Greens. Speaking of the Greens, they themselves will be presenting their chancellor candidate on Monday, and given they’re running at second-place in the polls, their choice could potentially become Chancellor following the election. According to our German economists (link here),they think that the odds appear slightly tilted towards Annalena Baerbock being chosen, who co-leads the party along with Robert Habeck. Given the current polls, the Greens would only move into the chancellery through a “traffic light” coalition with the SPD and the Liberals. However, that would require the Liberals to cross a number of red lines, and our economists’ baseline scenario sees the Conservatives regaining support later in the year, leading to a CDU/CSU-Green coalition where the Greens are the junior partner.

On the pandemic, Germany’s head of the Robert Koch Institute called on the country’s hospitals to “significantly reduce” elective procedures and move stable patients as the occupancy rate in intensive-care units rose to 88% on Wednesday. This comes as new cases yesterday was up to 31,117 – the most since mid-January. While the case counts grow, North Rhine-Westphalia Premier Laschet - featured above – ruled out negotiating a deal to acquire the Sputnik V Covid-19 vaccine, due to Russia not having provided enough data on the vaccine. This is also why the EMA has not yet recommended its use. He also did not want to start an “arms race” between states, relative to a cohesive German deal. There was some good news on the vaccine front with Airfinity, a London-based research company, who announced that 1 billion doses of Covid-19 vaccines have been made so far and are forecasting the world could produce another 1 billion doses of vaccines in the next month alone as production ramps up. While the US is among the world-leaders in vaccination rates, cases are still raising sharply in pockets around the country. Maine - the northeastern most state - announced their largest one-day increase since January driven by younger unvaccinated people, according to state health data. 20 to 30 year olds make up roughly a fifth of all new cases, compared with eight per cent at the start of the year. Elsewhere numbers continue to improve, NY state hospitalizations fell to their lowest level since December 1 and the weekly average rate of positive test results fell to 3.05%, which is the lowest since November 25.

To the day ahead now, and the data highlights include US housing starts and building permits for March, along with the preliminary University of Michigan consumer sentiment index for April. Meanwhile in Europe, there’s the new EU car registrations for March and the final Euro Area CPI reading for that month as well. Otherwise, central bank speakers include Dallas Fed President Kaplan and BoE Deputy Governor Cunliffe, and earnings releases include Morgan Stanley and BNY Mellon.