Good morning,

With dates in everyone’s diaries for the end of restrictions, Rishi Sunak looks to be doing his part to keep the economic safety net in place until we’re all out-out.  The chancellor is said to be likely to extend the furlough scheme until the end of June, which would hopefully just about tie in with the economy being back up to speed with the end of all restrictions.  He’s also looking at extending the stamp duty holiday for another three months, also until the end of June, in a bid to keep the property market ticking along between now and then as sales would risk slowing over the coming weeks if that were to have a hard stop at the end of March, as originally intended.  We could get more details on these ahead of the budget in a couple of weeks, particularly as an early announcement could maintain some momentum in the property market, rather than slow it down only to try and speed it up again.

The Telegraph is running with an exclusive, that says those diary dates might be brought forward if real world data shows that the government could move more quickly.  The dates are five weeks apart, so that the data can show whether the lifting of a specific restriction has spiked the R rate to an uncomfortable level.  If the numbers are better than expected, which could well be helped along by the vaccine dampening the contagion of the virus, then we might start to see things return more quickly.

It’s not all good news on the vaccine front:  AstraZeneca is likely to miss it’s Q2 deliveries of vaccine to the EU by as much as 50%, according to a Reuters article.  The miss on the 180 million vaccines it had promised is in addition to missing it’s 90 million dose delivery target in Q1, which is now likely to end up at just 40 million doses.  Such a massive shortfall is going to put at risk the EU’s targets to have vaccinated 70% of adults by summer and will also weigh on decisions within the bloc to start lifting restrictions, though AZ do hope to have made up on the shortfall by the end of the third quarter.  US News has more.

Over in the US:  The head of the Fed, Jerome Powell, signalled that the central bank would keep on with its QE programme as planned, despite things looking up in the economy and bond yields rising.  He spun it well, when he said that rising bond yields are an endorsement from the market that there will be a “robust and ultimately complete recovery”.  He did say that things might move faster than expected in terms of a recovery, but that the Fed’s job in the here and now is not yet done and as such there’s no change to the current stance.  This confirmation has led to markets bringing forward their expectations on when rates will rise, but they think that’s now in mid-2023 instead of early-2024, so it’s not as if they think inflation is an immediate issue that the Fed will need to get under control.

In Europe it’s a different story, with German inflation likely to be back at 2008 highs by the end of this year.  This comes as manufacturers are passing on increasing costs, due to raw material shortages and the spiralling cost of shipping, to the consumer.  The shortages of materials are widespread and are really a result of demand coming back online so swiftly following the initial phases of the pandemic. One industry of note is the automotive, where semi-conductors are in short supply, which has led to manufacturers having to turn back down production, not long after they’ve justified turning it on again. Commodity prices are also on the up and energy prices are the highest they’ve been for some time, with oil above $60.  For now though, these problems don’t look like they’ll get out of hand, as even though certain industries are in this position, there are plenty (aviation, hospitality etc.) that aren’t, so the hope is that by the time these industries get back online, the supply chain problems will have settled down elsewhere.  The FT has the story.

What we didn’t see on the back of the news from the Fed was a rally up in the stock market, which would normally be a given if the Fed yells ‘game on’ like they just have.  The S&P is yet to break the 4,000 level, having been within touching distance of it for most of the month, so what they may be holding out for is a Biden stimulus plan getting the green light.  The plan goes to the House of Representatives for a vote on Friday morning and it’s a done deal amongst Democrats at this point.  Some of the more moderate of Biden’s party are concerned over what the impacts of a $15 minimum wage will be on businesses and they’re also concerned about how much money will be injected in at state and local levels, rather than spent at federally . The vote only needs a majority in the House though and it’ll be a very brave Democrat that risks making a stand and being the one that topples the new President’s flagship policy.  Providing the bill clears the House on Friday, it should go to the Senate next week.  This could be the momentum the market needs to break that S&P ceiling.

Today is pretty quiet on the data front, but whether that will stop Sterling’s rise or not is anyone’s guess at this point.

Be well.

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