European equity close: Solid day after ECB picks up the pace

Closing changes for the main European equity markets

Closing changes for the main European equity markets
  • UK FTSE 100 +0.2%
  • German DAX +0.3%
  • French CAC +0.6%
  • Italy MIB +0.9%
  • Spain IBEX +0.6%
You can see the case for outperformance in the periphery given the step up in the PEPP pace from the ECB. It all looks a bit sluggish compared to the huge gains in the US today. The S&P 500 is up 1.4% and Nasdaq up 2.4%.

US dollar climbs higher with yields

US dollar at the highs of the day

The US dollar is catching a broad bid following the ECB press conference. I’m not sure I would connect the two events because there’s nothing particularly notable happening in the euro at the moment.
Yields are moving up at the long end in the US with 10s now at a session high of 1.53%. They had fallen as low as 1.47% a few hours ago. 30s are at 2.27% from a low of 2.21%. There’s a 30-year auction today.
The rise in the dollar has done little so far to dent equities but gold is now negative on the day and oil has carved out a double top at $65.60.
In short, there’s not a great reason for this move but keep an eye on yields.
US dollar at the highs of the day

Denmark suspends use of AstraZeneca vaccine due to serious cases of blood clots

As announced by the Danish health authority

The rollout and use of the AstraZeneca vaccine is halted temporarily in the country amid concerns that it is leading to increased risks of blood clots.


This relates to the case review posted by the EMA yesterday, in which an Austrian national was diagnosed with multiple thrombosis after receiving the AstraZeneca vaccine.
Keep an eye on this in case more countries start to join in the fray, as we are already seeing Austria, Estonia, Luxembourg, Lithuania, and Latvia temporarily suspend the use of the AstraZeneca vaccine for the time being.
So far, this looks more to threaten the vaccine rollout progress in Europe as there doesn’t seem to be much concern about this in the UK. But keep this in view.

China premier Li Keqiang: China’s 2021 GDP growth target of over 6% is not low

Remarks by China premier, Li Keqiang, after the NPC meeting

  • China is obviously optimistic about economy, but also realistic
  • China doesn’t want big fluctuations in GDP growth
  • 2021 GDP growth target should match that in the next year to avoid big swings
  • Growth target is aimed to guide expectations
Historically speaking, it is low but one also has to consider the current predicament of the global economy I guess. Nonetheless, when China sets the target as such, expect that to be hit one way or another regardless of how the economic figures turn out to be.

Dollar slumps amid retreat in Treasury yields

The dollar falls to the lows for the day as Treasury yields ease lower

10-year Treasury yields are now down more than 3 bps to 1.485% and the retreat in yields is putting pressure on the dollar across the board.
USD/JPY has nearly pared gains for the day, easing to 108.45 from 108.70 earlier while EUR/USD has moved up to 1.1968 and nearing its 200-hour moving average:
EUR/USD H1 11-03


The near-term level is seen at 1.1969 and a break above that will see buyers seize near-term control of the pair and start to look towards potentially testing 1.1990-00 next.
Elsewhere, AUD/USD is up to a high of 0.7780 while USD/CAD has also fallen to a low of 1.2588 as sellers start to eye last week’s low @ 1.2576-77 currently.

Economic data coming up in the European session

Can the ECB keep the party going?

The market kept the optimism flowing yesterday as the rotation out of tech continued to play out, with the Dow closing at another record level and stocks gaining in general.
Treasury yields backed off recent highs ahead of the 10-year auction  and stuck lower, allowing for investors to breathe in some calm for the time being.


The dollar kept lower as such, with risk trades faring better but the threat of higher yields remains in place as we look towards the FOMC meeting next week.
However, some stabilisation in the bond market is welcome news for risk sentiment and that will turn into a headwind for the dollar if overall conditions stay in-check.
The ECB is the key risk event to watch in European trading today and while they aren’t expected to make any drastic moves, they are likely to tweak communication in an effort to counteract the recent selloff in the bond market.
We’ll see if investors will end up being disappointed or if that is enough to keep the party going ahead of the weekend.
1245 GMT – ECB announces March monetary policy decision, statement
The prior (January) decision can be found here. Given the recent selloff in the bond market, the ECB might feel the need and pressure to respond more strongly in this meeting to try and counteract such developments from reoccurring moving forward. They don’t have much else to work with besides tweaking some policy language and perhaps making some intention that they have the flexibility to expand PEPP if necessary. On the latter, they could just bring forward that decision to today to put any debate to rest but I reckon they would likely see verbal intervention as being good enough for now. Other than that, expect the ECB to keep brushing aside any positive ticks in inflation and retain the standard gradual recovery outlook. I don’t see any risk of them cutting rates – not at this time.
1330 GMT – ECB president Lagarde press conference
If the ECB sticks with mostly the same language as in January, then Lagarde’s press conference will be key to see to what degree the central bank feels the need to push back against recent bond market developments. That is the big thing to watch out for and any clues on what might trigger the need for added dovish action i.e. tweaks to PEPP policy.
That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.
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