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Action was seen in the front end of the Treasury market


29 April 2021

Japan was closed for a holiday today but elsewhere stock markets got a boost from the FOMC’s commitment to ongoing stimulus and Biden’s USD 1.8 trillion social support plan, with stimulus expected to underpin the recovery in world growth.

Action was seen in the front end of the Treasury market. The 2-year yield dropped 1.6 bps to 0.164% from a test of 0.18% after the FOMC assured tapering and lift off was still not even in the conversation. There had been some suspicion, and pricing, for a possible bearish hint, which was not forthcoming.

Wall Street was mixed and choppy on the day before closing with slight losses, with the US indexes just off record highs initially and a mix of earnings. 

Apple, Facebook earned massive profits amid increased scrutiny. Apple reported record fiscal second-quarter revenue of $89.6 billion on surging sales of premium iPhones and pandemic-induced buying of its other products. Apple authorized an additional $90 billion in stock buybacks.

NatWest returned to profit in the first quarter of 2021 ($1.32 billion pre-tax). In Australia, much higher than expected import and export prices will keep lingering inflation concerns alive. Import price inflation finally turned positive and export prices jumped more than 11%. 

The Fed acknowledged rising inflation though and German preliminary inflation data for April is likely to be a focus today and could weigh on bonds later in the session. 

Amazon is raising wages for its hourly employees after a majority of workers at one of the e-commerce giant’s warehouses voted not to unionize. Facebook  temporarily blocked posts containing hashtags calling on Indian Prime Minister Narendra Modi to resign, then reinstated them on Wednesday, saying the action had been taken in error.

In FX markets, the USD continued to weaken as a doggedly dovish outlook from the FED and spending plans from the White House gave a green light for the global reflation trade, although the Yen also struggled and USDJPY held pretty steady at 108.61. The front end WTI future meanwhile is trading at USD 64.11 per barrel. The EUR and GBP gained against a largely weaker USD, with EURUSD at 1.2135 and Cable just under the 1.40 mark. The AUD was under pressure. USOIL is above $64 as bullish forecasts for a demand recovery this summer offset concerns of rising COVID-19 cases in India, Japan and Brazil. Palladium & Copper retreat from the all-time highs hit on Tuesday.

Today – The markets will quickly turn their attention back to earnings and data after the uneventful FOMC. Today’s data releases include German jobless numbers as well as Eurozone ESI confidence data, while the earnings calendar features reports from Amazon, Mastercard, Merck, Thermo Fisher, McDonald’s, Shell, Bristol-Myers Squibb, Caterpillar, American Tower, S&P Global, Altria, Southern Company, Twitter etc.

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