Covid variants darken the long-term outlook, even with vaccines

This story is a downer

Recent data from South Africa has shown that the variant there could dampen the effect of the vaccine and evade natural immunity in people who had been previously infected.
Reuters writes about how that variant and one in Brazil have changed how scientists believe the virus will progress. Previously, they had believed it was possible to eradicate.
“They now believe that SARS-CoV-2 will not only remain with us as an endemic virus, continuing to circulate in communities, but will likely cause a significant burden of illness and death for years to come.”
The good news is that vaccines will prevent severe outcomes and hospitalizations in most people.
That said, how likely are you to go to a crowded sporting event, bar or other activity with many people in close contact given ongoing variants? Some people wont’ care but some will, and that’s a damper until we get a better idea of the outcomes.
Another thing that’s worrying me is just how high infections remain in Israel. 51% of people there have now received the 1st dose of the vaccine and yet infections remain stubbornly high. Hopefully that’s just a one or two week lag but it’s not a great sign for a quick and full reopening, even without the worry of variants.

This story is a downer

European shares end with mixed results

German Dax falls short of a record close despite a new intraday all-time high

The German DAX is closing the day up 0.2%. However that is short of the all-time high close of 14109.48. The index did however reach a new all-time intraday high price of 14197.49. That extended above the old February 8 high of 14169.49.
US yields are higher
A look at the provisional closes in Europe are showing a mixed results:
  • German DAX, +0.2%
  • France’s CAC, +0.3%
  • UK’s FTSE 100, 0.8%
  • Spain’s Ibex, -0.2%
  • Italy’s FTSE MIB, -0.1%
in other markets as European/London traders look to exit:
  • spot gold has rebounded off its lows that got close to the $1700 level at $1702.04. The precious metal is currently trading at $1720.73 $-17.78 or -1.03%
  • Spot silver is trading down $0.40 or -1.51% at $26.35. The low price reached $25.84. The high prices up at $26.82
  • WTI crude oil futures are trading up $1.67 or 2.79%. This despite a surge of 21.563 million barrels has refineries reopened after the harsh Arctic freeze.
  • Bitcoin is up 7.95% or $3774 at $51,223. The high price extended to $52,666. The low price was way down at $47,373.29

US weekly EIA energy inventories +21,563 vs -1300K expected

Weekly US oil inventories

  • Prior was +1285K
  • Gasoline -13,624K vs -2500K
  • Distillate -9719K vs -3750K
  • Refinery utilization -12.6% vs +4.0% exp
API data released late yesterday:
  • Crude +735K
  • Cushing +732K
  • Gasoline -9993K
  • Distillates -9053K
I don’t know what analysts were looking for here. We all knew there were massive refinery shutdowns down to the cold in Texas. That led to a big backup in oil inventories and big draws in products.
Refineries are playing catch-up now but I’m not sure this changes the overall supply-demand mix. Though given a May US reopening, we could be having a huge driving season come summer and cracks could blow out.

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Rise in Treasury yields saps US equity futures

Like a shot in the arm

US 10 year rates
US 10-year yields are up 7.5 bps to 1.467%, near a session high.
Naturally, a three-month view to a vaccine date is creating a real sense of excitement in the US (and jealousy elsewhere). A three-month wait until ‘back to normal’ sounds like a great deal right now, especially with the fiscal taps wide open.
But it’s raising questions about the monetary taps and the market hasn’t been satisfied with the answers from Brainard, Daly and Barkin so far. We get Bostic (1700 GMT) and Evans (1800 GMT) along with the Beige Book today.
S&P 500 futures have erased their gains and are down 0.1%.

European bond yields tick a little higher after ECB report

The euro also climbs to fresh highs on the day


10-year German bund yields moved up 2 bps from -0.33% to -0.31% on the report earlier and is keeping around -0.32% currently. After all the verbal threats by the ECB this week, it appears there might not be much else to it and the bond market is responding in kind.
Treasury yields are also keeping higher on the day and that remains a key spot to watch in the market. 10-year yields are up 5 bps to a little over 1.44% on the session.
Following the ECB report, the euro is at fresh highs on the day now as EUR/USD climbs to 1.2113 from around 1.2080 earlier. This comes as the dollar is also trading lower across the board with GBP/USD touching 1.4000 for the first time since Friday.

Germany DAX touches record high as European equities keep the optimism flowing

DAX up 0.9% to a record high in early trading today

DAX D1 03-03

The ECB has not been shy to verbally talk against the recent rise in yields as of late and the rehash of more accommodative policy is feeding to better tones in European stocks this week. This follows from Panetta’s strong comments yesterday here.
Policymakers have not been shy to talk up the potential need to tap into the PEPP envelope and investors are able to take some comfort in that.
Adding to the positive mood today is that US futures are also pushing higher on the day, with S&P 500 futures up 0.7% and Nasdaq futures up 1.0% to session highs.
There is still a sense of push and pull in overall risk sentiment but it looks like dip buyers are keen to brush aside the declines from yesterday for the time being.
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