Good news on vaccine, bond selloff deepens, and oil supply debate heats up.
Result
The first real-world indication that immunization will curb transmission of the coronavirus comes from Israel, which is leading the world in the vaccine race. There, the Pfizer Inc. and BioNTech SE Covid-19 vaccine appeared to stop the vast majority of recipients becoming infected. In the U.K., an aggressive program to distribute the jab is driving rare outperformance in markets as its population prepares for a slow easing of rules. Prime Minister Boris Johnson is set to announce schools will reopen from March 8 as part of his roadmap for exiting the nation’s third lockdown.
Yields Breakout
Market reflationistas are winning the day as bond yields spike from Australia to the U.S. A key part of the Treasuries curve — the gap between 5- and 30-year yields — touched the highest level in more than six years. There are real-life indications of price pressures to back up the market moves. Figures last week showed U.S. retail sales surging and U.K. prices picking up — both nations that are moving fast with vaccinations. Even in Europe, the prospect of inflation is being entertained. It’s a bad time to be a bond bull: HSBC strategists Steven Major and Lawrence Dyer abandoned their recommendation to buy U.S. long bonds, saying they “cannot ignore” the reflation trade, even as they remain skeptical of it.
Oil Politics
Saudi Arabia and Russia are at loggerheads as they head into an OPEC+ meeting that’s renewing the debate on global oil supply. Riyadh is said to prefer keeping output steady while Russia wants to proceed with an increase. Iran is also set to take part as the Islamic Republic engages in a diplomatic back-and-forth that could eventually lift sanctions on its crude exports. Attention will also remain on Texas as the state tries to recover from the extreme weather. West Texas Intermediate crude traded around $60, just off a one-year high.
Markets
Bonds saw a deepening selloff and metals rallied as investors priced in bets for inflation and faster economic growth. Overnight, the MSCI Asia Pacific Index fell 0.7% while Japan’s Topix index closed 0.5% higher. In Europe, the Stoxx 600 Index had lost 0.7% as of 5:40 am as investors questioned whether strong growth will lead governments to pull back on stimulus. Copper vaulted above $9,000 a ton.
Coming up…
The Chicago Fed National Activity Index for January is at 8:30 a.m., while the Dallas Fed Manufacturing survey for February is at 10:30 a.m. Among companies reporting earnings today are Royal Caribbean Cruises Ltd., Discovery Inc. and Ingersoll Rand Inc.
What we’ve been reading
This is what’s caught our eye over the last 24 hours.
- Biden’s $1.9 trillion stimulus plan enters three-week Congress dash
- What to do if you didn’t get your full stimulus check
- Inflation angst is about to rewrite stock…
