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England Reopening Blow, ECB Bond, Bitcoin and Higher Crude - What's Moving Markets

EconomyJun 14, 2021 10:57
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By Peter Nurse -- England set to delay final reopening timetable, EU plans to launch 10-year recovery bond, Bitcoin surges to two-week high on Musk’s comments, while crude climbs to multi-year highs. Here's what's moving markets on Monday, June 14th.

1. England set to deliver reopening blow

Confidence has been growing throughout most of the Western democracies that the worst of the Covid-19 pandemic may be over as economies reopen on the back of ramped up vaccination programs.

However this optimism may receive a blow later Monday, with U.K. Prime Minister Boris Johnson due to announce whether the planned lifting of restrictions in England on June 21 can go ahead on time. And this is in a country that has been very successful in vaccinating its population,

The omens aren’t great as the rapid spread of the Delta variant, officially a "variant of concern", has thrown those plans into jeopardy.

Total British cases of the Delta variant, first identified in India, have jumped by 29,892 to 42,323, Public Health England said on Friday, adding that the variant currently accounted for over 90% of new Covid-19 cases.

British Prime Minister Boris Johnson said on Sunday he is now less optimistic about the U.K.’s pandemic outlook, suggesting restrictions may need to be kept in place beyond his target date for relaxing the rules.

More government support for businesses is likely if there is a delay to easing Britain's lockdown restrictions, junior health minister Edward Argar said on Monday.

"Were he (the PM) to make an announcement that he's delaying it, I would expect him to address that issue as well at the same time," Argar told the BBC when asked if there would be extra support for businesses

2. Stocks seen just higher; Fed meeting eyed

U.S. stocks are seen opening marginally higher Monday, remaining around record levels, ahead of this week’s eagerly anticipated Federal Reserve meeting.

By 6:30 AM ET, Dow Jones futures were up 10 points, less than 0.1%, S&P 500 futures were 0.1% higher and Nasdaq 100 futures climbed 0.2%.

The three major indices closed just higher Friday, with the broad-based S&P 500 ending 0.2% higher, at a new record high. The blue-chip Dow gained under 0.1% while the tech-heavy Nasdaq closed 0.4% higher.

The Fed’s two-day policy meeting will likely limit activity in the early part of the week. The central bank is not expected to take any action, but investors will be focusing on the statement at the conclusion of its two-day policy meeting on Wednesday amid concerns recent jumps in inflation could pressure the central bank to start tapering its stimulus sooner than expected.

“Our preferred view is that the statement, projections and press conference will not interfere with the core summer trend of a search for yield amidst a broad, cross-market decline in volatility levels,” said analysts at ING, in a note. 

In corporate news, Tesla (NASDAQ:TSLA) will be in the spotlight after CEO Elon Musk tweeted over the weekend that the electric car manufacturer will resume bitcoin transactions once it confirms there is reasonable clean energy usage by miners. 

Meme stocks like AMC Entertainment (NYSE:AMC), GameStop (NYSE:GME) and Clover Health (NASDAQ:CLOV) will remain in focus after last week’s volatile trading.

3. EU prepares for 10-year bond sale

The European Central Bank looks set to take a leaf out of the Federal Reserve’s pandemic recovery book by keeping its ultra easy monetary policies in place, and urging the region’s fiscal authorities to do the same, until there are clear signs that a recovery is underway.

“We have to take the economy through the pandemic and into a recovery phase, which has now started,” ECB President Christine Lagarde said in an interview with Politico published Monday. “We need to really anchor the recovery. We always talk about inflation anchoring and we are not oblivious to that. But the recovery needs to be firm, solid and sustainable.”

With this in mind, Reuters reported Monday that the European Union has hired banks for a 10-year bond sale, the first to finance its recovery fund, a crucial step in financing the bloc's economic recovery from the coronavirus pandemic.

The sale will be launched on Tuesday, subject to market conditions, Reuters said, and is the start of up to 800 billion euros of debt issuance that will back grants and loans to member states - an unprecedented act of fiscal solidarity on the EU's part that may transform it into a leading European borrower.

4. Bitcoin surges to two-week high

Bitcoin, the world’s largest cryptocurrency by market capitalization, surged Monday, climbing to a two-week peak just shy of $40,000 after Tesla boss Elon Musk suggested the electric car manufacturer could start using the digital currency as payment once more.

Comments from Musk have roiled Bitcoin over the last few months after he firstly announced that Tesla would accept it as payment for its cars, while purchasing $1.5 billion of the cryptocurrency. He later rolled back on this, saying the electric car maker would not accept bitcoin due to concerns over how mining the currency requires high energy use and contributes to climate change.

"When there's confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions," Musk said on Twitter on Sunday.

At 6:30 AM ET, Bitcoin was up 9% at $39,096.00, after having collapsed from a record peak of almost $65,000 amid a regulatory crackdown in China and Musk's apparently wavering enthusiasm for it.

Bitcoin has also been helped of late by the decision of El Salvador to adopt the digital currency as parallel legal tender, the first country to do so. 

President Nayib Bukele has played up bitcoin's potential as a remittance currency for Salvadorans overseas, but only a few of the traditional remittance companies who send the bulk of cross-border transfers have been seen taking advantage.

5. Crude near multi-year highs; U.S. air travel climbs 

Crude oil prices pushed higher Monday, trading near multi-year highs, helped by an improved outlook for demand as increased Covid-19 vaccinations push global travel back to near normalcy.

By 6:30 AM ET, U.S. crude was up 0.8% at $71.47 a barrel, climbing to its highest level since October 2018, and on course for a fifth quarterly advance, which would be the best run since 2010. Brent was up 1% at $73.38, around its highest since May 2019. 

Both contracts registered gains of over 1% last week, the third positive week in a row.

U.S. daily air travellers have topped 2 million for the first time since the pandemic began with traffic returning to pre-pandemic levels in North America and much of Europe as lockdowns and other restrictions are being eased, although the U.K. could throw a spanner in the works later Monday (see above).

That said, the International Energy Agency predicted last week that global oil demand will recover to pre-pandemic levels late next year, tying in with a bullish forecast from the Organization of the Petroleum Exporting Countries that demand in 2021 would rise by 5.95 million barrels per day, up 6.6% from a year earlier.

Additionally, Iran said it has reached a broad agreement with the U.S. over the lifting of sanctions on its industrial sectors, including energy, but warned there was “very little time left” for world powers to revive a 2015 nuclear deal.

Even with the market trading at these elevated levels, traders seem optimistic about the scope for further gains. Friday’s weekly data from the Commodity Futures Trading Commission showed that WTI positioning was at the most bullish in about three years.

One potential note of caution, U.S. oil rigs in operation rose by six to 365, the highest since April 2020, energy services company Baker Hughes said in its weekly report on Friday.

It was the biggest weekly increase of oil rigs in a month, as drilling companies sought to benefit from rising demand.

England Reopening Blow, ECB Bond, Bitcoin and Higher Crude - What's Moving Markets

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Comments (1)
Drake Richards
Drake Richards Jun 14, 2021 12:11
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and maybe a two week firebreak lockdown because you can never err too much on the side of caution
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