01.04.2021 - As of noon on Thursday, global equities were firmer on the week and trading in record territory. In advance of Friday's March US employment report, the yield on the US 10-year Treasury note is trading around 1.70%. The price of a barrel of West Texas Intermediate crude oil dipped to $60.30 from $61 last Friday while volatility, as measured by the Cboe Volatility Index (VIX), fell to 18.2 from 19.
MACRO NEWS
Biden unveils $2.3 trillion infrastructure plan
US President Joe Biden on Wednesday made public his plan to spend $2.3 trillion over eight years to modernize the country's transportation infrastructure, improve care for the aging, boost domestic research and development and address climate change, among other priorities. To help fund the proposal, the president would raise the US corporate tax rate from 21% to 28% and increase taxes on companies' foreign earnings, among other levies. Biden intends to seek Republican Party support of the legislation, but if efforts to reach across the aisle fail, he will likely pursue its passage under US Senate budget reconciliation rules that allow measures to pass with a simple majority of only 51 votes. A second legislative package focused on childcare, health care and education is expected later this year. Like its predecessor, that plan, it is believed, will come with $2 trillion price tag and will likely include tax hikes on upper-income Americans.
US consumer confidence jumps; Europe's rises
Consumers on both sides of the Atlantic grew more confident last month despite divergent COVID-19 trends, data released this week show. The Conference Board's US consumer confidence measure soared to 109.7 in March from a 90.4 reading in February as vaccine availability improved and coronavirus restrictions were relaxed. The European Commission's Economic Sentiment Index for the eurozone rose less dramatically, to -10.8 from -14.8 amid still widespread restrictions and a start–stop vaccine rollout. Vaccine availability remains limited in the EU, prompting Germany and France to begin talks with Russia on using its Sputnik 5 vaccine. Germany suspended the use of the AstraZeneca vaccine by those under 60 due to blood clot fears.
Little contagion from hedge fund collapse
A family office run by hedge fund manager Bill Hwang was liquidated this week, but the fallout was limited to the prime brokerage arms of a few international banks with exposure to the heavily leveraged firm Archegos Capital Management. Equities traded modestly firmer this week while Treasuries were largely range bound, though the benchmark US 10-year note briefly edged to a new pandemic high of 1.77% on Tuesday.
Suez Canal reopens
Crews early this week freed the Ever Given — the giant container ship wedged in the Suez Canal — allowing the canal to reopen. Hundreds of ships remain at anchor on both ends of the channel as officials prioritize vessels carrying livestock. Last week's closure hardened pandemic-related logjams already hindering the global supply chain.
Factories firing on all cylinders
Amid continued lockdowns in many regions, the global manufacturing sector continues to outstrip the services segment. The eurozone manufacturing purchasing managers' index illustrates how well the goods sector is holding up despite the pandemic, rising to an all-time high of 62.4 for March. The United Kingdom's PMI rose to 58.9, the highest reading in 10 years, while Japan's rose to 52.7. In China, the measure rose to 51.9 last month while the US reading jumped to 64.7.
QUICK HITS
The S&P 500 Index broke above 4,000 for the first time on Thursday.
US home prices, as measured by the S&P CoreLogic Case-Shiller Home Price Index, rose 11.2% year over year in January. That's the biggest year-over-year gain since February 2006, when the US housing market was beginning to peak in advance of the global financial crisis.
Despite the accelerating distribution of vaccines, coronavirus trends in the US have worsened over the past two weeks, with new infections rising 20%.
S&P 500 earnings are expected to rise 23% compared with the first quarter of 2020, according to FactSet Research. Earnings season for Q1 kicks off in about two weeks.
Germany's highest court this week blocked the ratification of the European Union's Recovery Fund. The move could delay the distribution of €750 billion to the countries hardest hit by COVID-19.
The United States is administering an average of more than 2.8 million coronavirus vaccine doses a day. At the present pace, it will take another four months to reach herd immunity, it is believed.
High frequency data, such as mobility indices and Open Table reservations, show that activity in the US is inching toward prepandemic levels while continuing to flatline in Europe. US air travel is trending up, as are job postings.
World Health Organization Director-General Tedros Adhanom Ghebreyesus said his organization's probe into the origins of the coronavirus outbreak did not adequately account for the possibility of a lab accident before concluding that the pathogen had most likely spread from bats to humans via another animal. The US and a group of other countries has called for an independent investigation into the origins of the virus.
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