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Futures Rebound In Solid Start To Volatile Quad-Witch

Courtesy of ZeroHedge View original post here.

The first quad-witching of 2021 has arrived and so far it has been relatively smooth sailing, perhaps because today's quad witch sees an abnormally low amount of option expiries (for a list of today's highest gamma single stocks click here).

US equity futures rebounded after Thursday's rout, led by technology stocks as bond yields withdrew from 14-month peaks and oil prices retraced some losses. At 07:15 a.m. ET, Dow E-minis were up 58points, or 0.18%, S&P 500 E-minis were up 11.75 points, or 0.2% and Nasdaq 100 E-minis were up 69.25.5 points, or 0.53%.

U.S. stocks tumbled on Thursday as Treasury yields jumped to the highest since January 2020, while frosty high-level talks between the U.S. and China also weighed on investor sentiment Friday. Some notable pre-market movers:

  • Oil majors Chevron and Exxon added 1.2% and 1.5% in premarket trading as crude prices stabilized a day after a selloff driven by concerns over demand.
  • FedEx jumped about 3% after the U.S. delivery firm said quarterly profit jumped more than expected on higher prices and surging volume from pandemic-fueled e-commerce deliveries during the holiday shipping season.
  • Nike dropped about 2.7%, leading losses among the 30 Dow components trading before the bell, after the company missed quarterly sales estimates due to shipping issues and a pandemic-related slump at brick-and-mortar stores.
  • The FAAMG stocks gained nearly 0.6% in premarket trading.
  • Plug Power shares fell 2.3% in premarket trading after the company received an expected notification from Nasdaq, saying it is not in compliance with the exchange’s listing rule

Trading volumes are expected to soar in the US on Friday due to “quadruple witching” in which futures and options expiries occur, and that typically also translates into elevated liquidity; there is also a major index rebalance which should support energy and value names according to JPM.

In Europe, the benchmark Stoxx 600 Index pared earlier losses spurred by concerns over the vaccine rollout and inflation to trade 0.3% lower following overnight losses on Wall Street spurred by inflation concerns, and on worries that delays to the vaccine rollout may hamper speed of the region’s recovery. The Stoxx Europe 600 Index fell 0.45% with cheap and cyclical shares leading a broad retreat among sectors. Energy shares fell the most, followed by miners and banks. Tech shares also underperformed after the Nasdaq 100 Index fell. Only utilities, seen as bond proxies, were in the green. European equities are sliding after closing within 2% of last year’s record level, with the European Union seeking to reset its vaccine campaign after reversing a ban on AstraZeneca Plc’s shots. 

France announced a lockdown of areas including Paris to fight the pandemic, casting a cloud over Europe’s outlook amid an uneven vaccine roll out even as the European Central Bank signaled continued monetary support.  Elsewhere, a number of European nations will start using AstraZeneca Plc’s Covid-19 vaccine again after Europe’s drug regulator declared it safe.

Here are some of the biggest European movers today:

  • Evolution Gaming shares jump as much as 4.8% after Goldman Sachs initiates on the stock with a buy rating. The broker said that Evolution’s growth, returns and cash conversion have yet to be fully captured in its valuation.
  • Enel shares climb as much as 2.5% after the Italian utility reported 2020 results and confirmed its 2021 targets. The renewables growth story is still on track, according to Morgan Stanley.
  • National Grid shares rise as much as 3.2% after being upgraded to buy at HSBC following the group’s acquisition of WDP assets and sale of its NECO unit.
  • Telecom Italia shares fall as much as 5.7% as Bloomberg reports that Italy’s government is set to review the country’s single-network plans, signaling it opposes a return to a phone industry monopoly led by the company.
  • Sabadell shares fall as much as 5%, the most since January 22, with Jefferies saying the Spanish lender’s press release indicates no sale of TSB is on the cards, removing a potential catalyst from its upcoming strategic update.

Strategists on average remain bullish on Europe, although its main benchmarks are closing in on year-end forecasts after strong rallies. “The sharp declines seen in the US last night, in particular on the Nasdaq 100, has set tone for this part of the world,” said CMC Markets analyst David Madden said in an email. “Bond yields rallied recently and that is diminishing equities appeal as some investors are keen to re-direct funds to bonds. Also, stock markets have lofty valuations so that provides an easy excuse to trim long positions.” In a Bloomberg poll, strategists on average saw the benchmark Stoxx Europe 600 Index gaining 2.8% by the end of the year versus Wednesday’s close, barely higher than predictions a month ago. They forecast a 1.3% gain for the Euro Stoxx 50 Index.

Earlier in the session,China’s CSI 300 share gauge slumped as chilly U.S.-China talks soured the mood, while Japan’s Topix rallied and the Nikkei 225 sank after the Bank of Japan said it will focus purchases of exchange-traded funds on the former gauge. As a result, Asia’s equity benchmark headed for its biggest drop in nearly two weeks, tracking the overnight slide in U.S. stocks after Treasury yields spiked. Technology was the worst-performing sector. Regional chipmakers and Chinese internet giants were among the biggest drags on the MSCI Asia Pacific Index, which lost as much as 1.2% amid a broader selloff. The first face-to-face meeting between senior U.S. and Chinese officials since Joe Biden became president also increasedrisk for some troubled markets. China’s CSI 300 Index, the worst performer among Asia’s major equity benchmarks, fell 2.6% lower. Japanese stocks also slipped after the Bank of Japan specified the size of its movement range for 10-year domestic bond yields and cut the reference to an annual buying target for ETFs.

As Bloomberg notes, a calmer tone is ending a volatile week in which Federal Reserve Chair Jerome Powell fanned inflation fears by messaging he’s willing to run the economy hot to help it recover from the fallout of Covid-19, and he’s not unduly concerned by rising yields.  “Economic recovery is on its way and we have central banks around the world very committed to easy monetary policy,” said Jun Bei Liu, portfolio manager at Tribeca Investment Partners, who sees value stocks benefiting. “Fundamentals of the equity market are looking very strong.”

The yield on the 10-year Treasury benchmark slipped back below 1.7%, a level it hadn’t breached since January 2020, and the dollar was steady. 10-year yields at 1.68% are ~3bp richer on the day as bunds and gilts outperform by 2bp-3bp; Treasuries 2s10s, 5s30s spreads are tighter by less than 1bp, remaining steeper on the week; 2s10s attained a multiyear high Thursday as 10-year yield traded at highest levels since January 2020

After futures led another bruising selloff in Treasuries on Thursday, the evidence is mounting that a big short position is responsible. Open interest in 10-year notes surged by almost 150,000 contracts, according to preliminary data, the equivalent of $14 billion in the cash bonds. Coupled with the price move, that suggests new short positions were added with overall open interest climbing to the highest in over a year.

Treasuries beyond the short end hold gains after following bunds and gilts higher in London trading. Block trades in 5- and 10-year note futures shortly after 6:30am ET appeared to fade this week’s curve-steepening trend, according to BBG. Curve is broadly flatter, with long-end yields richer by 1bp-2bp, amid bigger bull-flattening moves in EGBs.

In FX, the Bloomberg Dollar Spot Index reversed an earlier gain in early London hours as U.S. 10-year yields dropped four basis points to 1.67%, after reaching 1.75% Thursday. The greenback traded mixed versus its Group-of-10 peers, though moves were confined to recent ranges; the euro slipped below $1.19. The yen rose to a one-week high versus the greenback amid short covering after Bank of Japan’s policy decision, before paring its advance. Japanese government bonds edged lower after the central bank set out a wider-than-previously-thought movement range for bond yields and scrapped a buying target for stock funds at the end of a three- month policy review; it also said it will provide the specific amounts it’s spending on bond purchases, instead of a range, in its monthly plan starting from its April operations, The Aussie trimmed a loss in European session after falling to a day low after February retail sales missed all economists’ estimates.

WTI crude oil held above $60 a barrel after a 7% plunge. Bitcoin rebounded back to $59,000 after slumping as low as $56,500 overnight.

Looking at the day ahead, there is no data in the US while notable data releases include Germany’s PPI and UK public finances for February, as well as Canada’s retail sales for January. Meanwhile, central bank speakers include the ECB’s Panetta and Vasle, along with the BoE’s Cunliffe.

Market Snapshot

  • S&P 500 futures up 0.4% to 3,932.50
  • SXXP Index down 0.5% to 424.64
  • MXAP down 0.7% to 208.40
  • MXAPJ down 1.2% to 686.97
  • Nikkei down 1.4% to 29,792.05
  • Topix up 0.2% to 2,012.21
  • Hang Seng Index down 1.4% to 28,990.94
  • Shanghai Composite down 1.7% to 3,404.66
  • Sensex up 0.7% to 49,555.13
  • Australia S&P/ASX 200 down 0.6% to 6,708.22
  • Kospi down 0.9% to 3,039.53
  • Brent futures up 1.3% to $64.1/bbl
  • Gold spot up 0.4% to $1,743.64
  • U.S. Dollar Index little changed at 91.83
  • German 10Y yield down bps to -0.30%
  • Euro little changed at $1.1926

Top US News from Bloomberg

  • Oil, one of the most-favored reflation trades, just took a heavy beating. Prices headed for the biggest weekly slump since October after a sell-off driven by concerns that recent gains had been too rapid given mixed signals about near-term demand and a rising dollar
  • Treasury holdings at primary dealers fell another $16.1 billion in the week to March 10, extending a record $64.7 billion decline the previous week, according to Federal Reserve data released Thursday. Holdings have dropped to their lowest since October 2018, with declines across much of the curve and only seven to eleven year maturities seeing an increase
  • Armed with an all-clear for AstraZeneca Plc’s vaccine from EU regulators, European leaders must get a grip on a vaccine drive that’s lagging the U.S. and the U.K. and potentially delaying an economic recovery. The rising pace of cases and a renewed four-week lockdown in parts of France underscore the urgency of the threat
  • Germany’s coronavirus cases rose by the most in two months and the contagion rate inched closer to a critical threshold, days before Chancellor Angela Merkel hosts talks to decide on the government’s lockdown strategy
  • U.K. government borrowing totaled 19.1 billion pounds ($26.6 billion) in February, reflecting the cost of supporting the economy through a third lockdown to fight the coronavirus. The shortfall left the budget deficit for the first 11 months of the fiscal year at 278.8 billion pounds, almost six times the amount borrowed in the same period a year earlier, Office for National Statistics figures published Friday show. Net debt climbed to 97.5% of GDP, near the highest since the early 1960s
  • Denmark’s central bank will switch from operating one negative interest rate to three by the end of this week, joining several other peers that have overhauled frameworks in a bid to fine-tune their policy levers

A quick look at global markets courtesy of Newsquawk

Asian equity markets traded negatively following the tech sell-off in the US where the Nasdaq dropped 3% amid a jump in yields and energy underperformed as oil prices declined by around 8% for its largest decline in 6 months, while talks in Alaska have so far underscored the icy US-China relations with plenty of rebukes from both sides. ASX 200 (-0.6%) was dragged lower by commodity-related stocks including oil names following the overnight drop in crude prices which saw WTI briefly slip beneath the USD 60/bbl level and with a surprise contraction in domestic retail sales adding to the glum mood, but with losses in the index stemmed as the top-weighted financials sector marginally benefitted from the rise in yields. Nikkei 225 (-1.4%) gave back the 30K status with participants cautious amid the BoJ announcement where the central bank widened the yield target band to +/-25bps and scrapped the ETF target as speculated, while it also announced that it will now only purchase ETFs linked to the TOPIX (+0.2%) which saw the respective index eventually pare earlier losses. Hang Seng (-1.4%) and Shanghai Comp. (-1.7%) were weaker following the blunt rhetoric between US and China at their meeting in Alaska where US Secretary of State Blinken said that Chinese actions threaten rules-based order and that the US will raise issues of Xinjiang, Hong Kong, Taiwan and cyber-attacks, while a senior US administration official later said the Chinese delegation seems to have arrived intent on grandstanding and are focused on public theatrics, as well as dramatics instead of substance. This was after China’s top diplomat Yang responded to Blinken’s comments with a tirade in which he stated the US has many problems regarding human rights and uses military strength, as well as financial supremacy to pressure countries, while he also alleged that US is the champion of cyber-attacks. Finally, 10yr JGBs weakened with price action choppy amid the BoJ announcement whereby there was an initial knee-jerk reaction to the upside as a major newswire reported that the yield target band was kept unchanged, but then pared the move on clarification that the band had in fact been widened which dragged prices back below the 151.00 level but with the downside stemmed given that the adjustment was previously flagged by sources.

Top Asian News

  • BOJ Carves Out More Flexibility for Longer Inflation Fight
  • Bank of Japan Brings End to Decade-Long Buying of Nikkei 225
  • Didi Is Said to Accelerate IPO Plans as Business Rebounds
  • Tokio Marine Faces Larger-Than-Expected Exposure to Greensill

Cash bourses in Europe trade lower across the board (Euro Stoxx 50 -0.5%) following a similarly negative APAC lead as the regions react to the sell-off seen on Wall Street in the prior session and the US-China meeting. US equity futures however have gleaned some support from yields coming off highs, with the tech-laden NQ (+0.5%) the slight beneficiary vs the more cyclically-influenced RTY (+0.5%). Macro newsflow has remained light with participants on yield-watch after the US 10yr notched a Thursday peak of 1.7540%. Meanwhile, the first day of the high-level US-China meeting did not in any breakthrough as expected, but rather resulted in the two sides publicly rebuking each other, with the meeting set to continue today as the sides size each other up. Also note today is quadruple witching – a full schedule of the major expiries has been published on the Newsquawk website. Back to Europe, the cash open was mixed with heavy underperformance initially experienced in the FTSE 100 (-0.6%) which was seemingly a function of a firmer sterling coupled with firm losses across oil major amid yesterday's slump in prices – with Shell (-1.5%) and BP (-1.3%) both opening with losses in excess of 2.5% apiece. However, since then, the crude complex has recovered off worst levels and Sterling has waned off highs, thus the FTSE 100 trades relatively in-line with European peers. Sectors in Europe kicked off the session wholly in the red, but have since seen some sectors nursing losses and moving into the green – albeit these comprise of the defensive Staples, Healthcare and Utilities. The downside meanwhile consists of some of the more cyclical names with Banks also hurt as yields pull back, but Oil & Gas does not reside as the clear underperformer anymore. The tech sector meanwhile is somewhat cushioned, with losses modest in what is seemingly a consolidation from yesterday's declines. Elsewhere, French-listed stocks, namely travel & leisure sectors, as Paris is among 16 regions of France facing new lockdowns from midnight tonight. In terms of individual movers, Telecom Italia (-5.6%) resides at the foot of the Stoxx 600 with traders citing uncertainty over the single broadband network project after comments in past days by ministers in the Draghi government.

Top European News

  • EU Seeks to Reset Vaccine Campaign After Reversing Astra Ban
  • Thomson Reuters, Investors Sell $1 Billion Stake in LSE
  • U.K. Government Sells Part of Natwest Stake For $1.6 Billion
  • U.K. Grid Mega-Deal Throws Spotlight on Once-Unloved Assets

In FX, Friday fatigue could well be a factor following an exhausting week in the financial markets, but beleaguered bonds are getting some welcome respite on a combination of short covering and corrective trade ahead of the weekend to the detriment of the Dollar, or at least sapping its recovery momentum from post-FOMC lows. Indeed, the DXY has topped out again just ahead of 92.000 within a 91.963-655 range as most index components and G10 counterparts regain a degree of composure after yesterday’s concessions to the Greenback’s renewed and greater attraction.

  • NZD/AUD/CAD/GBP/JPY – The tables have also turned somewhat down under, as the Kiwi unwinds declines vs the Aussie, or vice-versa to test 1.0800 in wake of an unexpected fall in retail sales to offset some of the shine from outstanding jobs data and counterbalance the surprise contraction in NZ Q4 GDP. Hence, Nzd/Usd is sitting a bit more comfortably above 0.7150 than Aud/Usd over 0.7750, while Usd/Cad has drifted back down from an oil-induced spike beyond 1.2500 ahead of Canadian retail sales for January that may be rather stale, but still garner attention in the absence of any scheduled US releases today and as the Loonie keeps tabs on crude prices. Elsewhere, Sterling retains grip of the 1.3900 handle and the Pound looks ripe for another attempt post fresh 2021 lows against the Euro towards 0.8500 on bearish technical impulses, contrasting COVID-19 factors and comparatively divergent BoE/ECB policy stances. Last of this group, but not least, the Yen is back above 109.00 and gleaning encouragement from confirmation of a little more flexibility around the BoJ’s zero percent central target for the 10 year JGB yield, but also conscious of purported early RHS interest in Usd/Jpy around 109.30 for month end, as March also culminated with the end of fy 2020/21.
  • EUR/CHF – Aside from the negative impact of Eur/Gbp cross selling, the Euro is also struggling to sustain any real thrust vs the Buck through 1.1900 as the Bund/T-note spread continues to probe 200 bp, while the Franc remains largely contained between 0.9300-0.9200 and 1.1100-1.1000 parameters vs the Dollar and single currency respectively awaiting fresh inspiration from the SNB next week.
  • SCANDI/EM – Continuing the theme of hawkish moves and defying consensus, the CBR caught some out with a 25 bp hike, albeit comments in the run up may well have given the game away and tempered Rub reaction as 125 bp worth of tightening is being flagged for this year. The Rouble has rebounded nevertheless, but still lagging behind the Lira and Usd/Try is now beneath 7.2500 after the CBRT raised the FX swap rate to 19% from 17% to match the 1 week repo.

WTI and Brent front month futures attempt to regain some of lost ground during early European hours as oil prices continued their slide overnight. On this, fundamental factors for the fall in prices seen could be derived to Europe’s rising infection rates, alongside the suspension of the AstraZeneca vaccine rollout – albeit this was temporary as the verdict from the EMA resulted in Italy and the German region of Rhineland-Palatinate resuming the use of the AZN vaccine, while Sweden said it needs a couple of days to evaluate the ruling. Meanwhile 16 regions in France are poised to enter a four-week lockdown amid higher infection rates and low vaccination levels – note energy agencies have previously highlighted potential demand dents arising from the intermittent lockdowns in the OECD regions. Nonetheless, banks remain bullish on the near-term fundamentals – Goldman Sachs announced that it expects OPEC+ output to increase by 2.8mln bpd by August whilst it sees Brent rising to USD 80/bbl in the summer. UBS meanwhile forecasts the oil market to stay undersupplied and Brent to move to USD 75/bbl in H2 2021. WTI May trades just below the USD 61.00/bbl handle (vs low 59.11/bbl) whilst its Brent counterpart trades marginally above USD 64.00/bbl (vs low 62.33/bbl). Separately, initially spot gold and silver took advantage of the weaker Dollar but now both are seeing choppiness whilst trading in tight parameters. Spot gold remains sub-USD 1,750/oz (vs low USD 1,728/oz) and spot silver is just above USD 26/oz (vs low USD 25.89). Moving onto base metals, Dalian iron ore has fell overnight as traders are worried over the prospect of further production cuts in the top steelmaking city, Tangshan. Elsewhere, China's steelmakers are expecting a strong Q2 on the back of continued high demand and the expectation raw material prices will fall from recent highs as supply constraints reduce. LME copper meanwhile trades on the backfoot on either side of USD 9,000/t as the red metal trades in tandem to the softer risk tone across Europe. Goldman Sachs expects OPEC+ output to increase by 2.8mln bpd by August and sees Brent rising to USD 80/bbl in summer, while it views recent sell-off as a transient pullback in a large oil price rally and a buying opportunity.

US Event Calendar

  • Nothing major scheduled

DB's Jim Reid concludes the overnight wrap

Yesterday saw a sharp turn lower for US equities and another rise in Treasury yields as investors continued to digest the previous evening’s Federal Reserve decision. Though yields on 10yr Treasuries had been at around 1.66% when we went to press yesterday, which is roughly where they’d been trading immediately prior to the Fed’s announcement on Wednesday, shortly after they saw a big shift higher and surged above 1.7% for the first time since January 2020, closing the day up +6.6bps at 1.708%. Although that’s the highest level in over a year, that actually masks the extent of the intraday moves, since at one point they’d hit 1.753%, having been on track to move more than +10bps higher on the day.

The moves came as investors increasingly acknowledged that the Fed were serious about their new average inflation targeting framework that they announced at Jackson Hole, with the Fed’s latest dot plot on Wednesday showing that they expected rates to remain on hold through the end of 2023, even as inflation was projected to be above target. So altogether the FOMC are reaffirming their message that they’re happy to let inflation drift above target to make up for past undershoots.

The selloff was driven by higher real rates, which rose +7.6bps to their highest level since June last year, at -0.59%, in contrast to inflation expectations which actually fell back a little (-1.3bps), just off their highest level since 2013. What’s been noticeable however is that in spite of the Fed’s expectation in the dot plot that rates would remain on hold all the way out to end-2023, which took a number of investors by surprise, the market’s pricing of the eventual liftoff has remained very similar to what it was beforehand. That has an initial hike fully priced by Q1 2023, contrary to the Fed who indicated they’d still be at zero at the end of that year. So it seems that the FOMC’s forecasts haven’t allayed the residual fears among investors that they could need to hike faster than they’re currently planning in order to deal with a potential spike in inflation. As our economists wrote in their World Outlook earlier this week, if inflation did persistently overshoot and that led to a more aggressive set of hikes, this would hit global financial markets hard, with such a move potentially sending the world economy back into recession. That isn’t their base case scenario, but they note it’s the first time in a while that the risks to the US inflation outlook are skewed to the upside.

Against this backdrop, US stocks sold off sharply – particularly after the European close – amidst the news that France would be going back into lockdown (more below). More specifically, tech stocks suffered thanks to the moves higher in yields, with the NASDAQ (-3.02%) and the NSYE FANG+ (-3.61%) both selling off significantly. That said, the biggest sectoral underperformer in the S&P was energy (-4.68%), which came on the back of a major decline in oil prices, as Brent crude (-6.94%) and WTI (-7.12%) both saw their biggest moves lower since June and September 2020 respectively. There wasn’t an obvious single catalyst behind these moves in oil, but they come following two weeks of incredibly positive headlines that have driven prices to their highest levels since the pandemic began, thanks to the OPEC decision last week as well as drone attacks on Saudi Arabian oil facilities which raised the prospect of a geopolitical risk premium. Concern over the recovery in global economic demand seemed to play a role as well, since the number of global Covid cases have begun to rise again recently, something that’s led various European countries to move towards tougher pandemic-related restrictions.

More broadly, the S&P 500 was down -1.48% on the day, falling from its all-time high the previous session. The index was down -0.27% just prior to the Paris lockdown announcement, but then fell over -1% further by the closing bell. Early market sentiment wasn’t helped either by weaker-than-expected data, with the number of initial jobless claims for the week through March 13 coming in at 770k (vs. 700k expected), whilst the previous week’s figure was revised up +13k. Banks had a very strong day however thanks to the moves higher for yields, and the S&P 500 Banks were up +1.75% at a post-GFC high, whilst Europe’s STOXX Banks index (+2.33%) hit a post-pandemic high. Elsewhere on the continent, European equities outperformed their counterparts in the US having closed before the majority of the risk sell off. The STOXX 600 was up +0.40%, and core yields including 10yr bunds (+2.6bps) and OATs (+1.7bps) moved higher.

The selloff has continued overnight in Asia, with all the major equity indices moving lower, including the Nikkei (-1.22%), the Hang Seng (-1.55%), the Kospi (-0.59%) and the Shanghai Comp (-1.04%). The main news there has come from the Bank of Japan, which kept interest rates on hold in its latest policy decision, but moved to widen the band around its 10-year bond yield target to 25 basis points either side, in line with the report from the Nikkei newspaper we mentioned yesterday. On top of this, they eliminated the reference to their JPY 6trn annual ETF buying target while keeping the JPY 12trn annual ceiling on ETF buying intact, and said that they would only purchase ETFs tracking the TOPIX rather than the Nikkei, which saw the Nikkei tumble to an intraday low of -1.97% immediately afterwards. Finally, they said that they’d adjust their 3-tier reserve system if there were rate cuts, with lending incentives to banks which in effect will give the BoJ more room to lower the negative rate. Yields on 10yr JGBs are up +0.6bps to 0.113%.

The other big story overnight has been from the start of the high level US-China talks, which are the first of the Biden presidency. However, the tone from both sides was a harsh one, with US Secretary of State Blinken’s opening statement criticising China’s actions, saying that they “threaten the rules-based order that maintains global stability”. In response, China’s Yang Jiechi said that “Many people within the United States actually have little confidence in the democracy of the United States”, and also said that they had a “cold war mentality”. The tone will raise investor fears that US-China relations are likely to remain tense over the coming years, in spite of the change in administration in the US. In other markets, Treasury yields have moved slightly lower overnight, with 10yr USTs down -0.5bps this morning, though that still leaves them just above 1.70%. Meanwhile S&P futures are up +0.17% as we type, though the European bourses are pointing to a lower open as they try to catch up with the late sell-off in the US yesterday.

As referenced above it was another big day of news on the pandemic yesterday, as the French Prime Minister announced that Paris would head into another lockdown. Only essential businesses and schools will remain open, with the measures due to remain in place for four weeks. Elsewhere in Europe, Denmark has moved to ease restrictions on Monday March 22, two weeks ahead of schedule. In the US, more states have committed to opening vaccination eligibility to all adults in the coming weeks as the country pushes forward on its vaccination campaign. President Biden announced that the country has administered 100m shots within 58 days into his term, which is ahead of the administration’s original goal of 100 days.

Separately, we heard from the European Medicines Agency’s safety committee, which said that the AstraZeneca vaccine’s benefits “continue to outweigh the risk of side effects” and that “the vaccine is not associated with an increase in the overall risk of blood clots (thromboembolic events) in those who receive it”. However, they did say that the vaccine might be associated “with very rare cases of blood clots associated with thrombocytopenia”, and that although a “causal link with the vaccine is not proven”, it was “possible and deserves further analysis”. In response to the development, a number of EU countries including France and Germany said that they’d resume vaccinations. Here in the UK meanwhile, the MHRA regulator also said that “the available evidence does not suggest that blood clots in veins” were down to the AZ vaccine. The UK has continued to outpace other countries with its vaccination programme, and almost half of the adult population have now received a first dose.

Staying on the UK, the Bank of England’s MPC voted unanimously to leave policy unchanged yesterday, as they struck an optimistic note on the near-term outlook. According to their summary, global growth had been “a little stronger” than anticipated in their February forecast, and that the new US stimulus “should provide significant additional support to the outlook.” Furthermore, the easing of pandemic restrictions were faster than assumed in the February Monetary Policy Report, and the budget earlier this month also contained fresh measures that would likely reduce the expected increase in the near-term unemployment rate. However, they didn’t push back on rates pricing as such, and stuck to their language from the February meeting that they’d take action if market functioning worsened materially. In response, yields on 10yr gilts were up +4.6bps, which was a sharper rise in yields compared to elsewhere on the continent, though this lagged behind the moves in the US.

To the day ahead now, and data releases include Germany’s PPI and UK public finances for February, as well as Canada’s retail sales for January. Meanwhile, central bank speakers include the ECB’s Panetta and Vasle, along with the BoE’s Cunliffe.

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