07 June 2021
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G7 agree global tax rules

Finance ministers attending a G7 summit in the UK over the weekend came to agreement with regards global tax rules for large multinational corporations.

By Daniel Richards

  • Finance ministers attending a G7 summit in the UK over the weekend came to agreement with regards global tax rules for large multinational corporations. The deal will see a global 15% minimum corporation tax implemented as governments seek to prevent firms only reporting on earnings where they are headquartered, rather than where they actually make their profit. The proposals will next be discussed at the G20 meeting in Italy next month.
  • The US NFP jobs report disappointed to the downside once again in May, albeit to a lesser degree than the miss seen the previous month. The net gain in jobs was 559,000, compared to projections of 675,000. The figure for April was revised up to 278,000 (from 266,000 on the initial print) but was still far short of the 1mn that had been predicted last month. This took the unemployment rate for May down to a pandemic-low of 5.8% but given that the number of jobs is still 7.6mn lower than prior to the pandemic, the number of discouraged workers remains high. Indeed, the participation rate was still just 61% last month, compared to pre-pandemic levels of 63%. As the economy reopens and restrictions eased around the country, the hospitality sector is starting to recover, and restaurants and bars had the largest payroll gains at 186,000 jobs. Nevertheless, there remain questions around whether the slower recovery in employment is due to a mismatch in jobs, or if pandemic support payments are discouraging people from returning to the workforce. Many states support packages are due to end in the coming two months, which should prompt an answer to this question.
  • In other US labour market data, the initial jobless claims for the week ending May 29 was 385,000, narrowly beating predictions of 387,000. This was a pandemic-low, but remains significantly higher than pre-pandemic levels of 210,000 each week.
  • Turkish CPI inflation slowed in May, falling to 16.6% y/y, compared to 17.1% the previous month. Consensus expectations had been for a further acceleration in price growth, to 17.3%. The slower-than-expected inflation print could see a greater chance of a rate cut at upcoming meetings, despite there remaining considerable inflationary risks.

Today’s Economic Data and Events

10:00 Germany factory orders m/m: forecast 0.5%

20:00 Russia CPI inflation y/y: forecast 5.8%

Fixed Income

  • Benchmark government bond markets rallied hard at the end of the week in the wake of the US jobs report for May. While an improvement on the disappointing April numbers, the 559k jobs added in May suggests that the Fed will keep policy accommodative for some time yet. Yields on 10yr bonds fell nearly across the board: 10yr UST yields pushed to 1.5534%, down 7bps on the day and 4bps on the week while 10yr bund yields fell 3bps on Friday alone to -0.214% while bund prices have recovered all their losses endured in May.
  • The RBI voted to keep policy unchanged at 4% at its meeting at the end of last week but will expand its government bond purchases to INR 1.2trn in Q2 of the 2022 fiscal year, a faster pace of purchases than the INR 1trn for Q1. Yields on Indian 10yr bonds rose, however, as the government will now also include state bonds as part of its asset purchases.
  • Among other emerging market bonds, Turkey and South Africa moved in opposite directions. Market uncertainty over the next phase of Turkish monetary policy helped to sink bonds there and yields moved back up above 18% for the first time since the end of March when the previous governor of the TCMB was dismissed. South African bonds rallied though with yields falling 16bps to 9.127% at the end of the week.
  • Central bank activity this week has the Bank of Canada on June 9th and Russia on the 11th. However, the main action will be the ECB meeting on June 10th where no change in rate policy is expected but markets will closely track views on the pace of asset purchases over the coming months.
  • Oman is reportedly in the market for a USD sukuk to be issued later this year. Oman raised USD 3.25bn in an bond issue in January with the 10yr tranche currently yielding around 5.3%.


  • The dollar sank on US labour market numbers coming in softer than expected. The DXY index fell 0.4% on Friday with gains spread across all major peers to the dollar. However, the single day of losses wasn’t enough to offset gains recorded elsewhere in the week and the dollar still managed a weekly gain.
  • The Euro settled at 1.2167, a weekly loss of 0.2%. Market action may be timid ahead of the ECB meeting in the middle of the week. Elsewhere USDJPY fell 0.3% as the yen pushed well below the 110 level on Friday, appreciating 0.7% on the day alone. Sterling remains well supported around current levels of near 1.41-1.42 but slipped by around 0.2% last week, settling at 1.4157.
  • Turkish lira was the standout mover among emerging market currencies, weakening by 1.24% over the week to hit a new record low against the dollar. The lira managed a pull back on Friday but closed the week at 8.6685 against the dollar and is now down 16.5% since the start of the year. USDZAR has seen the opposite trend with the rand appreciating by 2.4% last week to close at 13.416 and is now the best performing emerging market currency on a year-to-date basis.


  • Global equity markets had a positive week last week, with only some losses in East Asia dampening the mood. The US jobs report, which was improvement to indicate an ongoing economic recovery, while not being so strong as to raise concerns about imminent tightening of monetary policy, helped push stocks higher.
  • The composite European index, the STOXX 600, hit record highs once again on Friday, as a 0.4% gain on the last day of the week led it to close up 0.8% compared to the previous Friday. The DAX was a particular gainer, up 1.1%, followed by the CAC (0.5%) and the FTSE 100 (0.7%). Travel firms weighed on the UK’s index at the close of the week following the latest travel restrictions announcement, and it closed up just 0.1% on Friday.
  • In the US, the Dow Jones was the biggest gainer last week, closing up 0.9% w/w, but the S&P 500 (0.7%) and the NASDAQ (0.6%) also closed higher.
  • In Asia, weaker-than-expected PMI figures out of China towards the end of the week weighed on markets in the region, with the Hang Seng ending down -0.7% w/w, and the Shanghai Composite -0.3%. The Nikkei lost -0.7% last week.


  • Oil prices pushed higher during the week hitting near year-to-date highs across the major benchmarks. Brent futures settled at USD 71.89/b, a gain of 3.3% on the week and WTI rose almost 5% to settle at USD 69.62/b. The uncertainty over how OPEC+ will respond in the second half of the year along with expectation that demand in major markets will remain strong are helping to support oil prices near our targets for a Q2 average of USD 70/b in the Brent market and USD 65/b for WTI.
  • This week oil market reports from the IEA and OPEC will set the tone for the demand recovery and whether a serious response from non-OPEC+ producers is possible. The oil drilling rig count in the US was unchanged last week at 359 and remains around 47% below its pre-pandemic level.
  • Inventory data from the US showed crude stocks fell by over 5m bbl in the last week of May while there were moderate builds across the rest of the barrel. All in all, total petroleum stocks actually increased nearly 2m bbl. Production eased back below 11m b/d, slipping by 200k b/d while product supplied was off by over 800k b/d to 19.1m b/d. 

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Written By

Daniel Richards Senior Economist

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