Good morning,

The official UK death toll passed 100,000 yesterday, whilst the number of confirmed cases globally went through the 100 million mark.  A very sad day, but with seemingly no immediate end in sight invariably there will be other grim milestones that we’ll continue to pass.

We’re expecting to hear from the prime minister today over plans for an Australia style quarantine system for people arriving from high risk countries.  There has been a huge amount of wrangling within government over exactly who should be placed into a hotel/enforced quarantine upon arrival, with some lobbying for everyone, almost without exception, whilst others want to retain a much looser approach.  The countries that are on the list are mostly in Southern Africa and South America – though interestingly the UAE might be on there too, which will no doubt lead to an uproar amongst the ‘influencer’ community, who are out there taking essential selfies in the sun. As well as the UAE, we could well see other countries added to the list, as the Brazilian and South African covid variants have been found in plenty of other places and there are other countries that aren’t on the original list where the infection rate is more than 300 people per 100,000.  At least starting slowly and ramping up if needs be will give authorities the chance to get the system right.

AstraZeneca’s CEO has defended the company’s position and what seems to be the UK’s unfair advantage in vaccine access, by saying the UK had a three month head start in the process when it signed a deal for 100 million doses back in May, before anyone knew how quickly a vaccine could be developed. This enabled AZ to invest in the UK production site and to “fix all the glitches we experienced.  As for Europe, we are three months behind in fixing those glitches.” Europe are yet to greenlight the AZ vaccine, but when they do it is likely that the first deliveries will fall short of the 80 million expected by the end of March and could be as low as 30 million, which is understandably causing a huge amount of frustration within the bloc.  Pfizer have given reassurances that the UK shouldn’t experience delays in the receipt of its vaccine, which is imported from Belgium, despite the growing frustrations in Europe.

Something else in Europe not going quite to plan is the delivery of their recovery fund:  France’s Finance minister has said that the process is “too slow and it’s too complicated” and that “we didn’t expend all that political capital only for the plan to be delayed for technocratic reasons”.  The political capital he was referring to was the landmark agreement for the bloc to issue mutualised debt, but it looks like the process the countries need to go through to get their hands on the funding mean that it’s not likely to be with them until the second half of this year.  Alongside speeding up the distribution process, he wants the EU to look at the budget deficit rules that, whilst temporarily suspended, restrict the amount of debt that can be issued to fill budget gaps.  There is concern that these rules won’t be fit for purpose, once we get into a post-pandemic recovery phase and will be a big constraint on growth. The FT has the story.

The value of the pound was briefly dented yesterday, as unemployment numbers showed the most out of work since 2016 and the fastest rise since 2009.  The data would be a lot worse if it weren’t for the furlough scheme, but the government support is falling short in the self-employed space, according to a report from the Institute for Fiscal Studies.  They say that the government could quite easily add a couple of categories to their support schemes that would lend assistance to a further 1.2 million people, at relatively little cost – around a billion pounds a quarter, which is just over 1% of what it’s forecast will have been spent on employment support schemes in this current financial year.

In the US:  only five Republicans voted for the impeachment trial in the Senate, making it quite likely that the proceedings won’t go ahead.  The vote was over whether the trial was constitutional or not and though it was won, it’s not the two thirds majority that would make it a done deal.  This is either a sign that the loyalty to Trump within the party remains strong, or that they would rather just move on and not let the oxygen in the room get used up on Trump.  An early test of this will be on whether Biden’s budget plans receive anything other than a blanket wall of no votes from that side of the aisle

Voting on those budget plans could start as early as next week and in doing so will kick off a long winded process of getting Joe Biden’s stimulus package into play.  The Democrats have the numbers to go it alone in passing the legislation, but to do so have to jump through multiple hoops and processes.  Getting this started now means there’s a chance the money comes into play in March.

Today will be all about the Federal Reserve interest rate decision and subsequent meeting minutes and statement. This will be a game of interpretation for the market and every word Jay Powell uses will be scrutinised to establish just how loose, for how long monetary policy will be. The market is expecting this to be a dovish affair and it’s not likely that Mr Powell will disappoint, but given that expectations are high there is a chance he can say the right things and still leave the market dissatisfied. We’ll let you know how it goes.

Be well.


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