European equity close: UK lags to end a strong quarter

Closing changes for European equities:

  • UK FTSE 100 -0.7%
  • German DAX -0.1%
  • French CAC -0.3%
  • Italy MIB +0.2%
  • Spain IBEX -0.6%
On the month:
  • UK FTSE 100 +3.9%
  • German DAX +8.9%
  • French CAC +6.5%
  • Italy MIB +8.0%
  • Spain IBEX +4.5%
The euro’s 3% drop in the month sapped some of those gains for foreign investors but it was still a great month.
On the quarter:
  • UK FTSE 100 +4.3%
  • German DAX +9.4%
  • French CAC +9.4%
  • Italy MIB +11.0%
  • Spain IBEX +6.5%
The story of the year so far is the botched eurozone rollout of vaccines and resurgent cases plus lockdowns. Yet the numbers in the equity market tell a different story. The euro is down about 4% ytd versus the dollar.

US weekly oil inventories -876K vs -1500K expected

Weekly US oil inventory data from the EIA

  • Prior was +1912K
  • Gasoline -1735K vs +700K expected
  • Distillates +2542K vs +500K expected
  • Refinery utilization +2.3% vs +1.7% expected
Private inventories released late yesterday but the API:
  • Crude +3910K
  • Gasoline -6012K
  • Distillates +2595K
Tomorrow’s OPEC+ decision is the big driver of crude, which was up 11-cents to $60.66 before this report. It initially popped on the release but quickly came back.

US dollar drops as March winds down. What’s happening

Heavy dollar selling kicks in

Heavy dollar selling kicks in
The US dollar is taking a big hit at the moment, particularly against CAD, other commodity currencies and the pound.
If you’re looking for explanations, you’re come to the wrong place. It’s quarter end and this is the way it goes. The London fix at the top of the hour will mean even more whippy moves.
Citi yesterday highlighted the chance of USD selling but said it would be ‘moderate’. At the moment, it’s anything but moderate.

Tax increases to be paying for Biden’s $2.25 trillion infrastructure plan – White House

The White House releases a statement ahead of Biden’s speech later today

  • $620 billion to be dedicated to transportation
  • $650 billion to be used for initiatives to improve quality of life at home
  • $580 billion to strengthen US manufacturing, research and development
  • $400 billion to address improved care for the elderly, people with disabilities
  • Tax increases to “fully pay for the investments in this plan over the next 15 years”
  • Proposes US corporate tax rate to go up to 28% from 21%

As a reminder, Republicans slashed the corporate tax rate from 35% to 21% back in 2017 so even the “hike” here isn’t as heavy; it is likely to be watered down surely.

But still, it won’t be music to the ears of big corporates and as the debate ensues in Congress, expect the whispers and musings to have an impact on market sentiment.

Nikkei 225 closes lower by 0.86% at 29,178.80

For the fiscal year of 2020/21, the Nikkei gained by 54.2% – the biggest climb in the index since the fiscal year of 1972/73

The Topix is also seen shedding 1% so there’s not much window dressing going on in Japanese stocks despite being the end of the fiscal year. On the month itself, the Nikkei is seen trading higher by 0.7% though.

Elsewhere, the Hang Seng is seen down 0.4% while the Shanghai Composite is also marked lower by 0.6% so far on the day.
US futures are keeping more tepid with little change observed, trading near flat levels to start European trading. That despite higher Treasury yields once again, with 10-year yields up nearly 3 bps to 1.73% as we get things going.

UK Q4 final GDP +1.3% vs +1.0% q/q prelim

Latest data released by ONS – 31 March 2021

  • GDP -7.3% vs -7.8% y/y prelim
  • Private consumption -1.7% vs -0.2% q/q prelim
  • Government spending +6.7% vs +6.4% q/q prelim
  • Exports +6.1% vs +0.1% q/q prelim
  • Imports +11.0% vs +8.9% q/q prelim
  • Total business investment +5.9% vs +1.3% q/q prelim
Slight delay in the release by the source. The preliminary report can be found here.
There are quite a number of notable revisions to the report, with consumption seen much weaker than initially estimated while business investment has been revised to being much higher than seen in the preliminary data.
In any case, the slight bump higher reaffirms the resilience in the UK economy despite the November lockdown at the time. Q1 economic conditions are likely to take a hit amid tighter restrictions but the outlook for 2H 2021 looks bright amid the quick vaccine rollout.
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