FOMC minutes confirm dovish bias

• Minutes from the March FOMC meeting highlighted the dovish tilt at the Fed and gave no indication there is pressure internally to move faster on raising rates or pulling back on accommodative policies. FOMC members are apparently evenly split on whether inflation will materialize sharply higher or lower with the net result being minimal concerns that price pressures are going to be a major concern in 2021. Additionally, the FOMC viewed the rise in UST yields as “reflecting” improvements in the US economy and warned about “disorderly” conditions in the UST market threatening the post Covid-19 recovery.
• Final estimates of March composite PMI for the Eurozone showed the index rising to 53.2, its highest level in the past eight months. For the individual economies, PMI levels were revised upward from flash estimates to all show expansion in their composite PMIs. In the UK, the final March composite PMI came in slightly slower than previously estimated at 56.4 but nevertheless is showing the UK’s economy ending a soft Q1 with some momentum.
• The UAE has appointed Khaled Mohammed al Tameemi as governor of the central bank, replacing Abdulhamid Saeed Alahmadi who is retiring. Governon al Tameemi had previously worked in the banking sector and had been vice chair of the CBUAE. In Dubai, Fadel al Ali has been named as chair of the Dubai Financial Services Authority.
• Oman is considering whether to list OQ, a holding company integrating many of the Sultanate’s energy holdings. The potential offering is at early stages and may included the IPO of one of OQ’s subsidiaries, not necessarily the holding group level.

Today’s Economic Data and Events

10:00 GE Factory orders m/m February: forecast 1.2%

16:30 US Initial jobless claims Apr 3: forecast 680k

Fixed income

• US Treasury markets oscillated in a narrow range overnight and ultimately closed mixed with the curve bear steepening by around 2bps. Yields on the short end were lower, with the 2yr UST down by less than 1bp at 0.1527% while the 10yr yield rose almost 2bps to 1.6739%.
• Emerging market bonds were mixed overnight. Indian bonds initially sank on the RBI’s pledge to keep policy unchanged but then drifted higher as the RBI indicated it would buy up to INR 1trn of bonds in the secondary market in Q2. Turkish 10yr yields had a reasonably quiet day by recent standards while South African yields were off by 13bps.

FX

• The US dollar was relatively stable against major pairs overnight with EURUSD slipping just 0.07% to 1.1868 and USDJPY rising 0.09% at 109.85. Most of the movement in FX market took place in cable where GBPUSD fell 0.63% to 1.3737. A potential disruption to Covid-19 vaccinations in the UK owing to concerns over the AstraZeneca vaccine may weigh on confidence that the UK will rebound as sharply as expected in coming months.
• Commodity currencies were weaker across the board with USDCAD rising 0.3% to 1.2609 and both AUD and NZD off by around 0.65% against the greenback.

Equities

• Global equity markets were fairly muted yesterday, with ongoing reassurance from the Fed regarding the reflation debate doing little to boost stocks by the end of the day. The S&P 500 and the Dow Jones did gain, but only modestly at 0.2% and 0.1%, while the NASDAQ closed -0.1% lower.
• In Europe, the composite STOXX 600 lost -0.2%, while France’s CAC closed flat and Germany’s DAX lost -0.2%. By contrast, the UK’s FTSE 100 closed 0.9% higher yesterday on the back of a positive outlook for reopening.
• Within the region, the DFM lost -0.6% while the Tadawul gained 0.3%. In Egypt, the EGX 30 lost -0.4%.

Commodities

• Oil prices gained overnight, seemingly shrugging off concerns that a constructive outcome to negotiations between Iran and the JCPOA partners could mean Iranian oil returning to markets later this year. Brent futures added 0.67% to settle at USD 63.16/b, WTI rose 0.74% at USD 59.77/b and Murban closed up 0.7% at USD 61.90/b.
• Oil markets also received a boost from a 3.5m bbl draw in US crude inventories last week, as reported by the EIA. Gasoline stocks though saw a large build with the net result being a modest rise in total petroleum stocks of around 2.5m bbl. Production fell back by 200k b/d to 10.9m b/d last week while product supplied was down 1.1m b/d to 19.24m b/d.  

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