Good morning,

Biden’s bill passed the Senate over the weekend, with just one more ratification back in the House of Representatives to go before it ends up on the Resolute Desk for signature, you would expect the market to have been a little happier about the prospect.
The market did move higher after the open, but has since reversed those gains, leaving the conclusion that the bill was already priced into the market and now it’s official it just means that investors can start to concentrate on what’s next from the Biden administration – which could well be tax policy and infrastructure spending.  One of those would be taken as a positive, the other one less so.  Biden’s policy isn’t there to satisfy markets though, it’s there to help the economy bounce back and the effects of that could be seen very quickly, as stimulus cheques could be posted out as early as this week, with equally little time being wasted on them being spent.  That money could even be spent at Disneyland, as it’s reported to be re-opening on the 1st April in California, albeit with capacity limits of 15% to start with.  This is part of a state wide re-opening, that looks a lot more controlled than others in the US.

A big bump in consumer spending might exacerbate the container crisis that we’re seeing, as Americans’ increase their purchase of imported goods, leading to more container port jams and delays, which in turn leads to ships offloading and heading back empty, rather than hanging on to pick up cargoes or empty containers for the return journey.  The New York Times has a great read from the weekend on the severity of the issue, which is threatening to increase food prices in Asia, as American producers can’t export the soy beans that they’ve grown, whilst rice exporters in South East Asia aren’t able to secure shipping containers to export their products.  The story has been ongoing for a while, but so far the disruption has largely gone unnoticed by the consumer.  Now though, they think that the problems will continue on through the whole of 2021 and that the supply chain won’t be able to soak up the additional costs, which means that this will have to find its way to the end user.

Fuelling a ship is becoming a more expensive endeavour too, as oil prices continue to climb.  We’re now above $70 per barrel and are at the highest levels seen since mid-2019, with the direction of travel not being tempered by OPEC, who have so far refrained from turning the taps back on.  The group of oil producing nations have said that they’ll keep output steady throughout April and Saudi have confirmed that they’ll maintain their million barrels per day output cut.  Choosing to keep output down and therefore prices up isn’t as obvious an idea as it might appear, because at these levels US Shale production becomes economically viable and it could start to see a bit of a return, therefore OPEC risks creating competition for itself.  Also the largest oil importers in the world are China and India and they will have something to say if countries don’t start increasing output levels in line with the return of economic activity.

In Europe, Germany’s CDU party has had a turbulent weekend after two of their MP’s announced they were standing down after personally profiting from a PPE procurement deal.  This couldn’t really come at a worse time for the party, with their new leader only in the job for a few weeks, their old leader (Angela Merkel) stepping down as Chancellor later in the year and just about every other party gunning to take down what has been a very dominant political party for the last decade and a half.  There are a couple of key regional elections taking place next weekend and this news is bound to have a significant influence on the outcomes, which in turn could roll into the national elections further down the line.

Mario Draghi is set to release a televised address to the nation today, his first since he took office in the middle of last month.  Though he’s been absent from TV screens, he’s wasted very little time in getting to grips with the role, both domestically and within the EU.  His move to block exports of the vaccine was controversial but, as is pointed out in an FT article, was probably “far from an act of nationalism (and instead) could be read as the necessary step to prevent reigniting dangerous Euroscepticism”.  Draghi will have also found a friend in Emmanuel Macron in making this move and these two are being touted as Europe’s new ‘power couple’, with both seen as being very pro EU and the countries probably have more in common with each other than they do Europe’s number one economy, Germany.  Today’s address from the new PM will be a test of his leadership, as he might well introduce stricter movements in Italy, probably regionally, but possibly even a nationwide lockdown, as cases in the country are above 20,000 per day and rising.

Andrew Bailey will be speaking today at the Resolution Foundation.  The Bank of England governor is pretty dovish in his approach to policy, so it will be interesting to see if he can maintain that approach as we take the first steps to unlocking (with children back to school today, it wouldn’t surprise us if sparkling wine sales spiked over the weekend, as parents prepare to raise a glass as their kids leave for school for the first time in months).  Other data of note as we go through the week includes European GDP, US inflation an ECB interest rate announcement and on Friday we get January’s GDP data – which is going to be terrible, but will hopefully be largely overlooked.

Have a great week

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