Good morning,

We’re a few days into the new financial year and investors seem reasonably up for taking a bit of risk early on.  The S&P finally broke through the 4,000 level on the first day of April and has managed to hang on to the level as people start to get back to their desks following the Easter Break.  Risk appetite can also be seen with a gentle weakening of the US Dollar and the inverse correlation between the stock market rising and the dollar falling looks (very tentatively) to be back.

A lot of that optimism is being driven by the United States, where vaccination progress is beating every target the administration sets and is now likely that every adult in the country will be eligible for a vaccine in less than two weeks’ time.  Another area they seem to have made progress on is the ‘will they won’t they’ on vaccine passports.  Yesterday the White House’s press secretary said that the administration won’t be looking at rolling out a passport scheme or “supporting a system that requires Americans to carry a credential” over privacy concerns.  The confirmation comes as a couple of US states recently legislated against any work towards making a proof of vaccination mandatory and now with the support of the federal government the argument is pretty well put to bed and it will now fall on companies and organisations to find ways to reassure would be customers over the safety of whatever activity it is they’re selling.

As well as vaccine progress, markets and sentiment seem to be responding well to Joe Biden’s infrastructure plan and are pretty accepting that taxes will have to rise to contribute towards it.  Jeff Bezos released a memo which “recognizes this investment will require concessions from all sides – both on the specifics of what’s included as well as how it gets paid for”. As well as steps towards increasing the US rate of tax, there is also progress being made on setting a minimum global threshold of corporation tax, with Janet Yellen spearheading the renewed effort to try and get something agreed.  Her plea to other nations to get onboard was conveniently timed with the beginning of IMF and World Bank meetings this week and France and Germany are already onboard and saying that it is realistic to expect that something can be agreed this year.  If the US is going to raise its domestic tax rates as significantly as they are planning, they need to make it less attractive for businesses to move tax jurisdictions, otherwise they’ve tilted the table against themselves.  The UK position is that making this move would have to be linked to digital taxation treaties that mean global tech firms pay tax in the countries where the revenue is generated, which is something the US had pushed back heavily on under Trump but could be the quid pro quo to get this deal done.

Progress is also being made between Iran and the US, with indirect talks in Vienna.  The New York Times is reporting that the two countries are establishing working groups to get both countries back into compliance with the 2015 Iran accord – so the US lifting sanctions and Iran reducing uranium enrichment back in line with pre agreed limits – though neither side wants to be the first to act.  The article is a long read, but an interesting one.

In the UK:  Wales starts to roll out the Moderna vaccine today.  The roll out of the third approved vaccine is slightly ahead of schedule.  Vaccination rates have dropped to about 100k a day as supplies temporarily run low, though the government are still confident we’re on track and that once we get through April we should get back to an average of 2.7 million doses administered per week until the end of July, when every adult should have had a first dose.

Labour are turning the heat up on the government over the Greensill Capital collapse, by urging a “full, transparent and thorough” enquiry into how the firm was allows to distribute tens of millions of pounds of government backed covid support loans, even though they weren’t regulated by the Bank of England or the FCA.  The collapse has got very political very quickly after it emerged that David Cameron had directly lobbied Rishi Sunak on behalf of Greensill, who employed him as an advisor.  The FT has the story.

Looking to today:  There’s a reasonable flow of data to keep the markets busy, as well as plenty of comments likely to come out of the various meeting at the virtual IMF and World Bank summits.  With the return of a bit of risk appetite, we’ll be interested to see what the resilience is like when the market gets a bit of news that doesn’t go its way – though we’re not sure exactly when this will be, in this current climate it’s unlikely to be too far away.

Be well.

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