Mixed vaccine news

Market movers today

In the US we get March Retail sales, which likely rose significantly boosted by the third stimulus check.

In Norway, the government has announced a press conference at 16.00 to present the decision on Astra Zeneca (AZ). Initially, we had expected Norway to restart the vaccination with AZ, but the risk of discontinuation has increased after the Danish decision yesterday to continue the vaccine roll-out without AZ.

We expect the central bank of Turkey to keep its policy rate unchanged at 19% this afternoon.

The Biden administration may today or in the coming days announce new sanctions against Russia over meddling with the 2020 election and hacking of SolarWinds, a US IT company. The sanctions are expected to target officials and entities in Russia.

The 60 second overview

Mixed vaccine news: Pfizer/BioNtech SE has announced a substantial 25% boost to the scheduled 200M delivery of vaccine doses to the EU in Q2. The 50M extra doses are welcomed amid renewed focus on blood clot risks with the viral vector vaccines in AstraZeneca and Johnson & Johnson. Yesterday, Denmark became the first country within the EU to drop AstraZeneca from the vaccine programme. The Danish Health Authority explained its research suggests a 1 in 40 000 risk of getting a blood clot from AstraZeneca - significantly higher than the probabilities from other studies. Most EU countries have limited the use of AstraZeneca to specific age groups and today Norway will announce its decision on the vaccine. Also yesterday, a US public health advisor panel decided to extend its decision on the Johnson & Johnson vaccine in order to collect more data and evidence.

Too early to shift rhetoric for the Fed: Fed Chair Powell, Fed Vice Chair Clarida and NY Fed President Williams all signalled that it is too early for the Fed to change rhetoric at the current stage. They also repeated that the Fed is outcome-based, so they are awaiting data to reveal a strong labour market recovery and higher inflation on a sustained basis (not only due to base effects). They also said that tapering will start before hiking rates. Overall, it was three influential FOMC members making sure that investors do not get ahead of themselves, as there is currently a big divergence between the Fed's current signal (no rate hikes through 2023) and market expectations (the first full rate hike is priced in by early 2023). We still believe the Fed will turn more hawkish within the next six months, but it is too early for them to do that, as the epidemic is not over yet. Still, the Fed continues to signal that the reaction function has changed significantly with the new monetary policy framework, so we should expect monetary policy tightening to be more gradual than in previous expansions.

Equities: Wednesday saw slightly lower equities, with MSCI World down -0.2%. The value versus growth theme continues to reverse day by day, and yesterday in favour of value. Small caps also outperformed, after a string of weak sessions. In the US, S&P closed down -0.4%, Dow up 0.2%, Nasdaq -1% and Russell 2000 0.9%. Among sectors, tech, consumer discretionary and communication services the worst performers. Financials, materials and industrials among the outperformers but the energy the leader on a strong day for crude. Asian equities mostly lower this morning, led by China while US futures indicate an opening in green.

Oil: Oil prices rose yesterday on the back of the weekly US oil inventory report which indicated that US oil demand has started to pick up. Prices got further support from the decline in the broad USD and geopolitical jitters between US and Iran over Iran's nuclear programme.

Yield Outlook: We have updated our yield forecasts. We expect further upside for global yields and noteworthy we expect 10Y bund yields to move some 20bp higher over the next couple of months as focus turns to the European reopening and as the market start to price in a less dovish ECB. For more see Yield Outlook: German yields set to tick up as focus turns to European reopening and ECB rhetoric.

FI: Global bond yields came under pressure yesterday, notably in in the afternoon session. There was no obvious trigger for the move that sent core yields higher by around 3bp. Bunds closed at -0.259%, which is the highest level since the February sell-off. The funding strategy from EU and the Irish supply is unlikely to be triggers for the bearish steepening we observed yesterday. The higher rates also weighted on notably Italian-Bund spread, which are also close to the widest in late February amid a EUR5bn additional borrowing plans from Italy.

FX: EUR/USD continued higher yesterday with the cross reaching 1.198 amid dovish Fed signals from Fed Chair Powell, Fed Vice Chair Clarida and NY Fed President Williams, who all signalled they still think discussions on rate hikes are premature. EUR/GBP is still following EUR/USD higher with the cross very close to 0.87. Commodity currencies (excluding CAD) had a very strong session yesterday with EUR/NOK temporarily moving down below 10.05.

Credit: iTraxx Xover tightened to 247bp (-2bp) and Main to 50½ (-½bp). Cash bond barely moved, with HY ½bp tighter while IG closed ½bp wider.