Good morning,

It’s budget day today, but this might not be the political highlight… Nicola Sturgeon is due to give testimony to an inquiry panel over her role in the Alex Salmond saga, whilst opposition parties are lining up for a vote of no confidence to take place – though some have decided to wait for her to have her day in court before this happens. It does look like Ms Sturgeon broke the ministerial code on more than one occasion and under normal circumstances this would be enough for a minister to stand down.  However, Nicola Sturgeon is a popular leader and there could be enough public support for her to feel justified in not doing this – therefore it could go down to a no confidence vote.  If that’s the case, the SNP don’t quite have the numbers to make this go away, as they only have 61 MSP’s in a house of 129, so four short of an outright majority and political alliances may be short on the ground if this morning’s testimony isn’t so much revelatory as it is confirmatory, of the news that’s been circulating.
Nicola Sturgeon isn’t just a popular leader, she’s also the most vocal proponent of Scottish independence, a subject we expected to come into sharp focus in April, May and beyond as we got into the Scottish elections.  If Ms Sturgeon were to fall from grace, it’s not quite clear what this would do to that agenda as it could leave a bit of a power vacuum in the SNP and make the elections a much bigger unknown.

Back to the budget:  We heard last night that the furlough scheme will now be extended to the end of September, with the government paying 80% of wages until the end of June and then employers expected to make contributions of 10%, increasing to 20%, over the remaining three months for any that are still utilising the scheme.  There will also be support packages rolled out for the self-employed and a host of other support measures designed to keep industries ticking over until the return of the masses.  What isn’t known yet is what sort of tax rises we might be facing and when they’ll kick in, but we’ve only got a few hours to wait, so why speculate?!

In Europe:  Reuters is running an exclusive story that French banks are lobbying for Brussels to enact laws that would force any euro derivative instrument to be cleared from within the EU.  Derivatives clearing remaining in London was the only financial services victory in the Brexit agreement and even that had a tentative best before date of the middle of next year.  The French banking body want a phased approach to moving contracts onto European bourses and they say that a plan needs to be in place about a year before it being enacted to enable the changes to be smooth.  There is obviously plenty to be said from both sides of the debate, but interestingly only a quarter of euro derivatives are held by EU banks, so this can’t just be a case of ‘majority rules’.

In the US: Joe Biden has given a significant upgrade to the vaccine timeline, saying that all adults will be vaccinated by the end of May.  This target was previously the end of July and the two month improvement is really down to the extra capacity that the Johnson and Johnson single dose vaccine has given them since it was approved by the FDA.  Texas has lifted its state mandated covid restrictions, with all businesses able to fully re-open without capacity limits and face masks in public are no longer mandatory either.  The move is the broadest easing of restrictions, but by no means the only one.  Other states have got children back to school and restaurants re-opened, but these moves are drawing criticism from the White House, who say they are putting at risk all the hard work that has been done.  The New York Times has a good summary.

There’s an interesting FT article today covering the actions of Australian treasurer, Josh Frydenberg.  Australia is seeing strong economic indicators from unemployment falling to GDP growth and is starting to wind down its covid support.  Their furlough scheme comes to an end this month, which is drawing some criticism as certain sectors are still affected by the pandemic, such as tourism and entertainment.  Mr Frydenberg is keen to get the public purse in check ASAP as he sees the stimulus efforts undertaken now as a threat to stability later, particularly as and when interest rates rise.  The article also covers his recent blocks on Chinese investment into the country, which he saw as increasingly becoming strategic from a state level rather than being purely economic, which therefore aren’t in Australia’s national interest.  He’s also the guy that managed to get Facebook to switch back on news posts in the country and is tipped as a possible future PM.

Looking to today, markets seem to be risk on and Europe is following Asia’s moves higher, albeit so far at a more moderate pace.  This probably bodes well for the Pound, as the currency seems to be almost entirely correlated to risk sentiment at the moment and little else – that said, the budget could throw a curve ball the markets’ way and as such it’ll really be down to how smoothly Rishi can deliver the news that we’re overleveraged and the coffers are empty, but that summer is nearly here and everything will be ok.

Be well


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