Good morning,

The Ever Given has been almost completely re-floated and will now be moved north along the canal to the Great Bitter Lake where it will undergo inspection.  Meanwhile the backlog of around 400 ships waiting to pass through the canal is the next headache and it’s not yet clear if they’ll be able to get on with this straight away, or if there will need to be some structural clean up following the work undertaken to free the vessel.  Crude oil hasn’t waited around to find out and has fallen a couple of percent on the news that the supply route is almost back online.  Other markets are likely to treat it as good news too, with the one week closure enough to stress, but not break many supply chains.

Equity futures will have a bit of work to do, as they’ve opened the week lower after a record high close on Wall Street on Friday.  The S&P500 closed just 25 points below the 4,000 level after a run up of more than 1.5% in Friday’s session.  It’s going to be a volatile week this week, with four trading days ahead of the Easter weekend and also the quarter/year end on Wednesday which will invariably see a lot of traders unwinding positions and rebalancing portfolios to make them look as good as possible to make sure their performance fees are as strong as possible.  It will have been an interesting year for a lot of funds and though the indexes look to have done incredibly well, with some stocks gaining in value by hundreds of percent as the world was forced into lockdown – so do you bank the profit now, or carry on trying to ride them into the new financial year? One family office decided to dump a couple of stocks on Friday with massive block trades in Viacom and Discovery, both of which have almost quadrupled in value over the last 12 months.  So far the futures market isn’t pointing too far down, but we wouldn’t rule out some herd mentality kicking in here.

In Europe:  Doctors in Paris have signed an open letter saying that they may have to start choosing which patients receive ICU care, as they’re running out of capacity.  Hospitalisations continue to rise, with another 103 placed in ICU and 453 new hospital admissions yesterday.  Emmanuel Macron has said that further restrictions are likely to be needed, but continues to rule out a national lockdown.  In Germany,  Angela Merkel has said that they may need to use federal laws if individual states don’t do enough to curb virus transmission.  The Chancellor is frustrated that states are moving to try and re-open the economy, but her own plans to extend the Easter holiday and use it as an emergency break were shot down in the court of public opinion last week and there now won’t be a strict national lockdown over the weekend to try and break transmission chains.

The Times reports that the UK and EU are close to agreeing a vaccine deal that will secure supplies.  Apparently the EU will remove the threats of blocking exports in exchange for the UK giving up some of its long term supplies of the AstraZeneca vaccine that will be manufactured in Holland.  As well as being the ‘win-win’ that both sides had touted the deal as being, it might also start to ease the friction between the two sides in other issues too (Northern Ireland).  The EU were also pleased that it wasn’t Lord Frost that was doing the negotiations, but sir Tim Barrow, the former ambassador to the EU, which made it less political.

Elsewhere:  China and Iran have signed a 25 year economic deal which will see China invest in Iran and increase its oil purchases.  The deal has taken five years to negotiate, but the timing of its signing won’t be lost on America.  Iran saw sanctions reimposed by the Trump administration and those are yet to be lifted by Joe Biden, despite him saying he is willing re-engage with the country.  China will be more than happy to increase its oil imports from Iran, which are cheap and stable, and in doing so they will reduce the leverage that Joe Biden has, making this a win-win for Beijing.  The deal isn’t being universally applauded in Tehran though, with protestors calling it a sell-out.

Looking to the week ahead:  The first couple of days are pretty quiet on the data front, but month end positioning and concerns that more funds will be offloading stocks should keep the next 48 hours interesting.  On Wednesday we get a UK GDP reading and European inflation numbers, which will no doubt have the markets reading into what central banks need to and are able to do (two very different things).  The big one for us is on Friday, which is the non-farm payrolls and also Good Friday, a market Holiday.  This could be an incredibly strong payrolls number, as the bounce back in jobs as the US economy re-opens is likely to be significant and the market participants are going to be thin on the ground, which means if there is a directional move, it could well be a big one.

Be well.

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