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US Premarket News 29-03-2021


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The Newsquawk pre-market roundup -

 

• Asia-Pac equity markets eventually traded mostly higher as the region picked up the baton from last week's late surge on Wall St

 

• In FX, the DXY consolidated overnight, EUR/USD was rangebound beneath 1.18, GBP/USD sits on a 1.37 handle

 

• German Chancellor Merkel threatened the use of federal law to toughen pandemic restrictions

 

• The stuck tanker in the Suez Canal has reportedly been refloated with engineers partially freeing the ship

 

• White House Press Secretary Psaki stated that President Biden plans to split his Build Back Better package into two separate proposals.

 

In The News

Markets

 

U.S. Futures Drop, Stocks Mixed After Block Trades

 

U.S. equity futures fell and Asian stocks were mixed Monday as traders assessed a $20 billion wave of block trades. Oil dropped after the ship blocking the Suez Canal was partially refloated.

 

Shares in Japan retreated amid a slide in Nomura Holdings Inc., which warned of a possible “significant” loss that people familiar with the matter said was related to the unwinding of trades by Archegos Capital Management LLC. A gauge of Asia-Pacific shares was little changed.

 

U.S. equity futures declined following revelations that Archegos -- the family office of Bill Hwang -- was behind the block trades, selling Chinese tech giants and U.S. media firms. Credit Suisse Group AG said it and a number of other banks are existing positions after a hedge fund defaulted on margin calls. European equity futures were marginally in the red.

 

West Texas Intermediate crude was more than 2% lower after the Ever Given was refloated. It wasn’t clear how soon the Suez Canal would be open to traffic. A dollar gauge ticked higher and 10-year U.S. Treasury yields slipped.

 

Oil slumps as Suez Canal container ship starts to move

 

Oil slumped more than 2% on Monday after news from the Suez Canal that salvage crews have managed to move the giant container ship that has been clogging up the vital global trade passage for nearly a week.

 

Brent oil was down $1.38, or 2.1%, at $63.19 a barrel by 0511 GMT. U.S. crude fell 1.48 cents, or 2.4%, to $59.49 a barrel.

 

The stranded container ship Ever Given has almost been completely floated and will be inspected before it is moved, a shipping source with knowledge of the matter told Reuters on Monday.

 

Bond Bulls Charge Ahead, Challenging Consensus on Rising Yields

 

Robert Tipp doesn’t buy the popular Wall Street view that U.S. government bond yields are bound to keep rising this year, though he allows that they could before likely falling later.

 

The chief investment strategist at PGIM Fixed Income, Mr. Tipp is among a relatively small group of contrarians who have bet for months that the forces lifting bond yields—expectations for a post pandemic surge in growth and inflation, increased government borrowing—are no match for the structural factors that have suppressed them for decades.

 

Mr. Tipp’s position is notable because he and other so-called bond bulls have generally been right about the direction of Treasury yields over the past 30 years. That gives their perspective some added ballast as investors confront a set of highly unusual circumstances, including the possible end of a pandemic and an unprecedented surge in peacetime government spending and tax cuts.

 

The yield on the benchmark 10-year U.S. Treasury note, a key driver of interest rates across the economy, topped 1.7% earlier this month for the first time since the start of the coronavirus pandemic, settling Friday at 1.658%. That was up from 0.913% at the end of last year but down from around 5% 15 years ago and 8% 30 years ago.

 

Vanguard, BlackRock Join Investors Pledging Net-Zero Emissions

 

The world’s largest asset managers have joined a group of investors committing to cut the net greenhouse-gas emissions of their portfolios to zero.

 

BlackRock Inc. and Vanguard Group Inc. are among 43 investment firms managing more than $22.8 trillion of assets that are joining the Net Zero Asset Managers initiative, according to a statement Monday. By signing up, the money managers are pledging to support efforts to limit global warming to 1.5 degrees Celsius by targeting net-zero emissions by 2050 across all their holdings. They also will set a public goal for the proportion of their assets that in 2030 will be on course for net zero.

 

Eliminating emissions is becoming a greater focus for investors as activists, clients and regulators push them to move from talk to action and use their influence and resources to hold companies to account. And there is a growing urgency to act since scientists have said emissions need to drop by about 50% by 2030 and reach net zero by the middle of the century to avoid the most catastrophic impacts of climate change.

 

“Climate change represents a long-term, material risk to our investors’ portfolios,” Vanguard Chairman and Chief Executive Officer Tim Buckley said in the statement. “As a steward of our clients’ assets, we recognize the crucial role we and others play in driving real progress on climate risk over time.”

 

Nomura shares plunge after fire sale of $20bn in US and Chinese stocks

 

Nomura could face a total wipeout of its profits for the second half of the financial year following a fire sale of about $20bn of Chinese and US stocks linked to a massive unwinding of assets by Archegos Capital Management.

 

Shares in Japan’s largest investment bank fell by as much as 16 per cent on Monday morning in Tokyo, erasing over $3.2bn from its market capitalisation, as Nomura warned of recent transactions with an unnamed client and the risk of a “significant loss” at its US subsidiary.

 

Bankers from other institutions providing prime brokerage services to Archegos said they understood the fund was the unnamed client referred to by Nomura. The Japanese bank provides prime brokerage services to Archegos, which was founded by former hedge manager Bill Hwang, they said.

 

A private investment firm, Archegos was behind billions of dollars worth of share sales that captivated Wall Street on Friday. The fund, which had large exposures to ViacomCBS and several Chinese technology stocks, was hit hard after shares of the US media group began to tumble on Tuesday and Wednesday. The declines prompted a margin call from one of Archegos’ prime brokers, triggering similar demands for cash from other banks.

 

Credit Suisse warns of 'significant' losses from exiting hedge fund positions

 

Credit Suisse’s first quarter results could suffer a material impact after the bank started exiting positions after a U.S.-based hedge fund defaulted on margin calls it made, the bank said on Monday.

 

“While at this time it is premature to quantify the exact size of the loss resulting from this exit, it could be highly significant and material to our first quarter results,” the bank said.

 

Switzerland’s second biggest lender said the un-named hedge fund defaulted on margin calls made last week by Credit Suisse and other banks. A margin call is a demand from a broker to add more money to an account to cover potential losses.

 

Following the failure of the fund to meet these margin commitments, Credit Suisse and a number of other banks are in the process of exiting these positions, Credit Suisse said.

 

Europe

 

Merkel presses German states to get tough with COVID curbs

 

Chancellor Angela Merkel pressed Germany’s states on Sunday to step up efforts to curb rapidly rising coronavirus infections, and raised the possibility of introducing curfews to try to get a third wave under control.

 

Merkel expressed dissatisfaction that some states were choosing not to halt a gradual reopening of the economy even as the number of infections per 100,000 people over seven days had risen over 100 - a measure she and regional leaders had agreed on in early March.

 

“We have our emergency brake ... unfortunately, it is not respected everywhere. I hope that there might be some reflection on this,” Merkel said in a rare appearance on broadcaster ARD’s Anne Will talk show.

 

Coronavirus infections have risen rapidly in recent weeks, driven by more transmissible strains of the virus. Merkel’s chief of staff warned earlier on Sunday that the country was in the most dangerous phase of the pandemic and must suppress the virus now or risk dangerous mutations that were immune to vaccines.

 

On Sunday, the incidence of the virus per 100,000 rose to 130 from 104 a week ago. The number of total confirmed coronavirus cases in Germany increased by 17,176 to 2,772,401, data from the Robert Koch Institute (RKI) for infectious diseases showed on Sunday. The reported death toll rose by 90 to 75,870, the tally showed.

 

UK economic data confound forecasters and beat expectations

 

The latest UK economic data has been significantly better than economists expected, suggesting households and companies have been more resilient to the latest lockdown and Britain will climb international economic performance league tables in the months ahead.

 

Most of the important economic data for the period of the lockdown that began on January 4, including output, employment, business sentiment and public finances, have been better than forecast and much stronger than in the first lockdown, showing the ability of businesses and consumers to adapt.

 

With the UK economy poised to reopen gradually in the weeks ahead amid a successful coronavirus vaccination rollout, unlike much of the EU, the prospects for the immediate economic recovery are strong.

 

The positive surprises also lower the immediate pressure on policymakers to provide further monetary or fiscal boosts.

 

UK govt to provide sports with further 50 million pounds in support package

 

The UK government said it is providing a further 50 million pounds ($68.88 million) in support grants for sports in the latest tranche of its winter survival package to help deal with the financial impact of the COVID-19 pandemic.

 

The government said in a statement on Monday that horse racing, rugby league, speedway and drag racing would receive a combined 40 million pounds, while National League soccer clubs across Steps 1-6 will get 10 million pounds.

 

The grants will help cover essential costs due to the lack of spectators at venues because of the pandemic.

 

“We promised to stand by and protect our major spectator sports when we had to postpone fans returning,” said Culture Secretary Oliver Dowden.

 

More than a fifth of small UK exporters have temporarily halted EU sales

 

More than a fifth of small British exporters have temporarily halted sales to the European Union and 4% have done so permanently, a survey showed on Monday, highlighting problems that have followed the Brexit trade deal.

 

A trade agreement between London and Brussels that came into force on Jan. 1 has caused disruption and delays for some companies having to deal with new bureaucracy and rules.

 

In the survey by the Federation of Small Businesses (FSB), 30 out of 132 exporters said they had stopped sales to the European Union temporarily, while five reported having done so permanently.

 

Just over one in 10 said they had set up, or were thinking of establishing, a presence within an EU country, the research, conducted between March 1 and 15, showed.

 

UK's Johnson urges caution as some lockdown measures ease

 

Prime Minister Boris Johnson urged Britons to be cautious as a stay-at-home order and some other lockdown measures are lifted in England, citing rising cases in other parts of Europe and the threat posed by new variants of the virus.

 

The government will also set up a new Office for Health Promotion to help tackle obesity, improve mental health and promote exercise. Johnson himself said he was “too fat” when he became gravely ill with COVID-19 last year.

 

From Monday, up to six people, or two households, in England can meet outside whilst outdoor sporting facilities such as tennis and basketball courts can be used with social contact limits in place.

 

Bank of England clamps down on Brexit-driven EU relocations

 

The Bank of England is demanding that lenders seek its approval before relocating UK jobs or operations to the EU, after becoming concerned that European regulators are asking for more to move than is necessary for financial stability after Brexit.

 

The BoE has taken this stance — described by one senior banker as “increasingly curmudgeonly” — after hearing of several requests from the European Central Bank that it considers excessive and beyond what is required from a prudential supervisory perspective, according to people familiar with the move. Governor Andrew Bailey has taken a personal interest in the issue, they added.

 

UK politicians and regulators have long been concerned that their European counterparts are attempting to poach as much financial services business as possible under the guise of repatriating robust oversight of all euro-related financial activities. They fear the loss of associated jobs, tax revenue and prestige.

 

Americas

 

Blinken says finishing Nord Stream 2 pipeline ultimately up to builders

 

U.S. Secretary of State Antony Blinken said in an interview broadcast on Sunday that it was ultimately up to those building the Nord Stream 2 natural gas pipeline whether to complete it despite opposition from Washington.

 

On Wednesday, Blinken said he had told his German counterpart that U.S. sanctions against the pipeline from Russia to Germany were a real possibility and there was “no ambiguity” in American opposition to its construction.

 

Because the pipeline would run from Russia to Germany under the Baltic Sea, bypassing Ukraine, critics argue that it would deprive Kiev of lucrative transit revenues and potentially undercut Ukrainian efforts to counter Russian aggression.

 

The Kremlin says the $11 billion venture led by Russian state energy company Gazprom is a commercial project, but several U.S. administrations have opposed the project.

 

Biden Plans to Split Spending Plan in Two

 

President Biden plans to split up his next big government-spending push into two programs and will lay out his vision for an infrastructure-focused first proposal, including green-energy programs, at an event in Pittsburgh this week, a top administration official said Sunday.

 

The second proposal, which the administration plans to release in April, would focus more on child care and healthcare programs, among other priorities for the administration, White House press secretary Jen Psaki said on “Fox News Sunday.”

 

At some point the administration plans to propose tax increases on higher-income households and businesses to help pay for the programs, though it has yet to lay out its tax strategy or how it will fit together with the next two proposals. Ms. Psaki also left open the possibility that both elements of the president’s spending plans could be pursued in one legislative package.

 

U.S. Farmers Vie for Land as a Grain Rally Sparks Shopping Spree

 

In a resurgent American Farm Belt, the hottest commodity around is dirt.

 

Across the Midwest, prices to buy and rent farmland are climbing as demand is driven by rallying grain markets, historic government payments and low interest rates, according to economists, agricultural lenders and land managers.

 

The battle for farmland is playing out in small town community centers, online portals and parking lots, where bids in Covid-19-era auctions are placed with a wave from the window of a pickup truck or a quick flashing of headlights.

 

There, auctioneers are peddling parcels of land to farmers eager to cash in on the best commodity prices in nearly a decade. They are also presiding over intense jockeying for fields that can test the fabric of rural communities as a shrinking set of growers compete for control of the nation’s prime soil.

 

“Each month it seems like we’re setting new highs in the auctions we’re handling,” said Mike Norgaard, co-owner of Northwestern Farm Management Co., which sells and rents land in such states as Iowa and Minnesota.

 

APAC

 

China warns companies against politicising actions regarding Xinjiang

 

Chinese officials on Monday said Sweden’s H&M and other foreign companies should not to make rash moves or step into politics after the companies raised concerns about forced labour in Xinjiang, sparking furious online backlash and boycotts.

 

H&M, Burberry, Nike and Adidas and other Western brands have been hit by consumer boycotts in China since last week over comments about their sourcing of cotton in Xinjiang. The growing rift comes as the United States and other Western governments increase pressure on China over suspected human-rights abuses in the western region.

 

“I don’t think a company should politicize its economic behaviour,” said Xu Guixiang, a Xinjiang government spokesman at a news conference on Monday morning. “Can H&M continue to make money in the Chinese market? Not any more.”

 

“To rush into this decision and get involved in the sanctions is not reasonable. It’s like lifting a stone to drop it on one’s own feet,” he said.

 

Chinese social media users last week began circulating a 2020 statement by H&M announcing it would no longer source cotton from Xinjiang.

 

Middle East

 

Container ship Ever Given has been partially refloated in Suez Canal

 

The container ship Ever Given has been partially refloated and tugs are still assisting operations at the Suez Canal, according to shipping agencies and sources at the location with knowledge of the developments.

 

Representatives of shipping agencies said they were still waiting for the Suez Canal Authority to make an official announcement. It remained unclear as to what extent the vessel had been dislodged and how soon the passage would be open to vessel transits.

The Ever Given has already been partially refloated, but the salvage operation is continuing, an official at shipping agent, Leth Agencies said, adding that several tugboats were assisting the ship.

 

Even with the ship refloated, it will be several days before the traffic backlog can be cleared, and the near-term impact will only wear off early next month, a few shipping brokers said.

 

The main challenge is to safely tow the ship away without it running aground again, a marine navigator tracking the developments said.

 

Iran and China sign 25-year cooperation agreement

 

China and Iran, both subject to U.S. sanctions, signed a 25-year cooperation agreement on Saturday to strengthen their long-standing economic and political alliance.

 

“Relations between the two countries have now reached the level of strategic partnership and China seeks to comprehensively improve relations with Iran,” Chinese Foreign Minister Wang Yi was quoted by Iran’s state media as telling his Iranian counterpart Mohammad Javad Zarif.

 

“Our relations with Iran will not be affected by the current situation, but will be permanent and strategic,” Wang said ahead of the televised signing ceremony.

 

“Iran decides independently on its relations with other countries and is not like some countries that change their position with one phone call.”

 

India calls Saudi advice on tapping stored oil 'undiplomatic'

 

Indian oil minister Dharmendra Pradhan on Friday described his Saudi counterpart’s advice to reduce oil stores to tackle high crude prices as “undiplomatic”.

 

“That was in a way (an) undiplomatic answer by some of our old friend. I politely disagree with that kind of approach.

 

“Certainly India has its own strategy, when and how to use our own storage, and we are conscious about our interests,” Pradhan said at Times Network’s India Economic Conclave in the Indian capital.

 

Pradhan has criticised OPEC and Saudi output cuts aimed at supporting prices and suggested India will have to look for energy alternatives to Gulf oil, its main source of crude.

 

  • With India hard hit by rising oil prices, Pradhan has repeatedly called on the Organization of Petroleum Exporting Countries and its allies, known as OPEC+, to ease supply curbs.

That's it for now more later!!

 

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