03 March 2021
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Sunak to extend UK furlough scheme

Ahead of his budget due to be released today, UK Chancellor of the Exchequer Rishi Sunak has announced an extension to the UK furlough scheme.


By Emirates NBD Research

  • Ahead of his budget due to be released today, UK Chancellor of the Exchequer Rishi Sunak has announced an extension to the UK’s furlough scheme. The scheme, which pays 80% of wages for those enrolled who have been put on temporary leave because of the Covid-19 crisis, had been scheduled to end in June but will now be extended for a further three months until the end of September. Sunak has also pledged support for the newly self-employed, a group of some 600,000 who have somewhat fallen through the cracks of government pandemic-related aid since the crisis began. More details will become clear when the budget is officially announced later, but an extension to the stamp duty holiday for properties under GBP 500,000 is anticipated.
  • Eurozone inflation held steady as expected last month according to a flash estimate from Eurostat, the European Union's statistics office. The data showed prices in the 19 countries sharing the euro rose by 0.2% on the month in January and 0.9% compared to a year earlier. Core inflation which excludes volatile food and energy prices, slowed to 1.2% from 1.4% a month earlier, and an even narrower measure, which excludes alcohol and tobacco prices, slowed to 1.1% from 1.4%. Prices are likely to rise further in the near term, driven by a slew of one-off factors, including the rebound in crude oil prices, the reversal of the German value added tax, in addition to new weights in the inflation basket.
  • On an annualised basis, Canada’s economy grew at a rate of 9.6% q/q in the fourth quarter, beating analyst expectations of 7.5%, data from Statistics Canada showed on Tuesday. Real GDP likely climbed 0.5% y/y in January, according to preliminary estimates. Economic activity edged up 0.1% m/m in December, an eighth consecutive increase, but remained -3.0% below December 2019 levels. The Canadian economy posted its largest annual drop on record in 2020, down -5.4% y/y on the year. Canada has struggled with a harsh second wave of Covid-19 infections in recent months, as Ontario and Quebec both imposed strict restrictions in December and January to contain the spread. Those are now being loosened. In response to the Covid-19 pandemic, the central bank last year slashed interest rates to near zero and introduced a large-scale quantitative easing program to support liquidity.
  • British house price growth picked up unexpectedly last month rising 6.9% y/y in February from 6.4% y/y in January, mortgage lender Nationwide said on Tuesday, against expectations of a slowdown. In February prices rose 0.7% m/m, more than reversing a -0.2% m/m decline in January and against expectations for a -0.3% m/m drop. Nationwide pointed out that the outlook for the housing market was particularly uncertain right now, with the potential for it to be boosted further by Finance Minister Rishi Sunak when he presents his annual budget today. However, it warned a weakening labour market could slow the recovery. Media reports indicate the finance minister is set to extend a temporary cut to property purchase taxes until June and announce a new mortgage guarantee scheme for first-time buyers.

Today’s Economic Data and Events

  • 13:30      GB Composite PMI (Feb) Forecast 49.8
  • 13:30      GB Services PMI (Feb) Forecast 49.7
  • 16:30      GB Annual Budget Release                
  • 17:15      US ADP Nonfarm Employment Change (Feb) Forecast 168K
  • 19:00      US ISM Non-Manufacturing PMI (Feb) Forecast 58.7
  • 19:30      US Crude Oil Inventories Forecast -5.190M


Fixed Income

  • Global bond markets turned higher overnight as calm seemed to settle over markets. Yield performance on the UST curve was mixed with 2yr yields holding roughly steady at 0.12% while the 10yr gave up almost 3bps to close below 1.40%. UK gilts turned the richest with yields down 7bps on the 10yr to close at 0.685%.
  • EM bonds witnessed a mixed performance. Yields on India’s 10yr settled higher by 2bps at 6.23% while South African bonds added 6bps to push above 9% while Turkey’s 10yr yield added 12bps to close out just below 13%.


  • Most currencies saw a late session gain against the USD after Fed governor Lael Brainerd committed to asset purchases and that conditions for either higher rates or ending QE were “some time” away. The broad DXY index was down 0.28% overnight at 90.785. EURUSD was a major beneficiary, adding almost 0.4% after a few days of heavy selling to settle at 1.2091. GBPUSD experienced more muted gains of 0.2% but is still short of the 1.40 handle.
  • AUD pushed higher overnight to 0.782 and is pushing higher this morning thanks to a positive GDP read for Q4 2020 (up 3.1% q/q) and commitment from the RBA for stimulus to stay in place. Both CAD and NZD also appreciated against the dollar.


  • Despite gains in Europe earlier in the day, Wall Street slipped lower yesterday, with all three major indices closing down. The NASDAQ was the biggest loser, ceding -1.7%, followed by the S&P 500 (-0.8%) and the Dow Jones (-0.5%).
  • The sell-off in the US could have been influenced by warnings from Guo Shuqing, head of the Chinese banking regulator, that financial markets in Europe and the US were in a bubble, and running counter to what was being seen in the economy at large. The Shanghai Composite fell -1.2% yesterday, but it has regained the bulk of that in early morning trading today, up 1.1% at the time of writing.
  • European equities largely shrugged off Guo’s words and fairly weak data out of Germany where unemployment unexpectedly rose in February. The DAX managed to close 0.2% higher, while the CAC gained 0.3%  and the STOXX 600 European composite 0.2%. In Italy the FTSE MIB lost -0.8%, while the UK’s FTSE 100 rose 0.4% ahead of today's budget. However, it is still the European laggard, up only 2.4% ytd.
  • Within the region the DFM gained 0.7% and the Tadawul 1.2%. The Egyptian EGX 30 lost -0.4%.


  • Oil prices extended losses in the lead up to the OPEC+ meeting later this week. Brent futures were off by 1.6% to USD 62.70/b while WTI fell back below USD 60/b, down 1.47% overnight. OPEC’s secretary general Mohammad Barkindo noted the “continued improvement” in the oil market which may presage a modest increase in output later this week.

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Written By


Emirates NBD Research Research Analyst

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