Five Things You Need to Know to Start Your Day
Good morning. Some bad news for beach holidays, steady bond purchases ahead and exciting U.S. jobs data. Here’s what’s moving markets.
The U.K.’s travel green list revision disappointed holidaymakers and airlines on Thursday, with no new countries added to the list of quarantine-exempt destinations,
while Portugal was dropped. The country had been the only nearby sun-spot of any size in the category, and from Tuesday, it reverts to amber, requiring 10 days of self-isolation. Airlines have pinned their hopes on a loosening of travel rules across the European region as vaccinations roll out, but those plans have been disrupted by the spread of new variants and a creeping rise in case loads.
Ahead of the European Central Bank’s policy meeting next Thursday, economists surveyed by Bloomberg expect officials to
extend the current phase of faster bond-buying through the summer to ensure the economic rebound even after lockdowns end. The majority expects the ECB to keep purchasing about 20 billion euros worth of debt a week until September before slowing down. Most expect the 1.85 trillion-euro pandemic program to finish in March 2022, as planned. The central bank accelerated purchases in March to keep financing conditions favorable, and policy makers have
resisted the notion that they’ll pull back on buying as governments ease curbs on public life.
U.S. President Joe Biden has
pitched to Republicans the idea of a 15% minimum tax on U.S. corporations, along with strengthened IRS enforcement efforts, as a way to fund a bipartisan infrastructure package. The proposal sets aside the Biden administration’s earlier plan to raise the headline corporate income rate to 28% from 21% — a non-starter for Republican lawmakers — though that could be pursued elsewhere. Biden had earlier made a $1.7 trillion infrastructure proposal to Republicans. Taking a 28% corporate tax rate off the table would eliminate what the Treasury Department estimates is $857.8 billion in revenue over a decade.
Jobs Jobs Jobs
Markets are bracing for U.S. nonfarm payrolls for May, with consensus estimates pointing to a gain of 674,000 after April’s disappointing 266,000. The so-called whisper number among traders has even risen to 790,000, which would be the biggest monthly gain since last August. Such optimism follows yesterday afternoon’s data release from payrolls processor ADP, which blew estimates out of the water at 978,000, the best in
nearly a year. Meanwhile closer to home, the Financial Times reported that U.K. firms hired permanent staff
at the fastest pace in 23 years last month.
European stocks are pointed slightly downwards, following drops in Asia and the U.S. after strong data stoked concerns anew over a pullback in central bank stimulus. It’s a light day for earnings but a busy day for central bankers and finance ministers — the Fed’s Jerome Powell will join other central bankers from Japan, China, the ECB and elsewhere at panel discussions at the Green Swan conference. U.S. Treasury Secretary Janet Yellen is in London where the G-7 finance ministers and central bank chiefs will meet. And all eyes will be on the May jobs report in the U.S. Elsewhere, Twitter Founder Jack Dorsey and the Winklevoss twins are speaking at Bitcoin 2021 in Miami, though Elon Musk’s latest cryptic tweet suggests his love affair with the cryptocurrency might be over.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
And finally, here’s what Cormac Mullen is interested in this morning
The global bond market has been for the most part little changed this week but underneath the surface there were worrying signs of a few cracks in the edifice. Investor demand for German debt fell to the lowest since July 2019 in a two-year bond offering while an auction of new Japanese benchmark notes drew the lowest bidding interest in five years. And as my colleague James Hirai pointed out, Norway came close to canceling a debt sale after demand for its 2025 securities evaporated. The signs of waning interest in sovereign debt comes as investors balk at the low yields on offer in an environment of rapid economic recovery and with governments ramping up their issuance to pay for pandemic stimulus programs. That’s usually a recipe for higher bond yields. But the auction wobbles won’t have escaped the attention of the world’s central bankers, the go-to buyers of last resort. Should anaemic demand become an established trend at upcoming auctions, officials’ taper talk will likely become a lot more muted and that should help cap any excessive rise in yields.
Cormac Mullen is a cross-asset reporter and editor for Bloomberg News in Tokyo.
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— With assistance by Gearoid Reidy, and Cormac Mullen
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