Good Morning,

Spain has warned the UK that it will only allow Brits to holiday in the country this summer if the arrangement is reciprocal.  Authorities in Spain have said that tourists will be welcome if they can show a negative test result or can show a ‘digital vaccination certificate’  –  this will be on the NHS app, which links to your medical records and will be live within a month – but that Spain expects the UK to accept Spanish tourists on the same terms.  The Telegraph point out that this isn’t necessarily an issue for Spain, as they’ll likely be moved to the green list from the middle of next month,  but it does mean that bilateral travel agreements will need to be in place with multiple countries, which may in turn mean that we are more heavily restricted on where we can travel, or that positions will have to be relaxed by the UK government to allow marginal countries in.

Another Telegraph article worth your time this morning talks about the risk of significant corporate bankruptcies in Europe as pandemic support is rolled back.  The European Systemic risk Board is warning that because the lifelines were given out so freely,  we didn’t see the natural shuttering of failing businesses last year, and now with financial aid coming to an end and debt burdens needing to be serviced there could be a “tsunami” of defaults that put pressure on European banks and in turn slow down the wider recovery.  This slow down would act as a negative feedback loop and mean that more companies struggle to recover and then add to the default burden.  Bank of America research points to more than 200,000 companies across Spain,  France,  Germany and Italy being at risk of going under once lifelines are withdrawn.  The suggestion is that countries should look at converting debt obligations into grants to help avoid the worst of this, but with a total borrowing from these companies of more than €1.5trn, it would be no token addition to a countries debt pile to do this.

In the US:  The Federal Reserve held steady as expected on policy, though they did upgrade their economic outlooks . The main statement takeaway was “we’re still 8.5 million jobs below February 2020…we are a long way from our goals”.  We expected a non-event and we got one really, even though there was an upgrade in optimism accompanied by no change in tone toward policy, stock markets closed the day slightly lower.
The other possible market mover was going to be Joe Biden’s American Families Plan, but given so much of it was known ahead of time and we immediately heard politicians from both sides questioning the cost of the plan, the market had little to say about it.  As well as the announcement of the package, it was Biden’s first address to Congress and coincided with his first 100 days in office. CNN has five takeaways from the event.

Apple knocked it out of the park yesterday, beating pretty much all forecasts in all of their product categories in the three months to March.  Their revenues for the quarter were just under $90bn and earnings per share beat expectations by about 40%.  They have warned though that they are going to fall victim to the global chip shortage and that sales in this quarter could be hit by as much as $4bn as a result.

Facebook also had a bumper earnings quarter which pushed their share price to near record highs.  The drive higher in the share price will be seen as a relief for executives of the company who are concerned that Apple’s move to allow people to lockdown their privacy settings from their device will hurt revenues and therefore dent investor appetite.  Apple introduced its privacy controls earlier this week which will allow consumers to be more anonymous online.  This is good for consumers, but bad for small business argues Facebook.  The detail of it is in The Times.

Today is reasonably data heavy, with German employment and inflation in the spotlight first thing, European consumer confidence following on and a run of US data in the afternoon including GDP and jobless claims.  Joe Biden will also be interviewed on NBC this afternoon, which will be some welcome background noise.

Be well.

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