MORNING BID- Reflation trade has legs

A look at the day ahead from Danilo Masoni. The reflation trade is showing its strength this morning and while bond markets come under more pressure and commodity prices scale new peaks, a sense of unease is gripping equity investors.

While futures point to a weaker start for Europe and Wall Street after losses in Asia, copper has crossed the $9,000 mark for the first time since September 2011 and U.S. 10-year yields are fast closing in on a fresh one-year high at 1.4%.

The moves reflects optimism about a fast recovery from the pandemic downturn but with it the spectre of inflation and the chance central banks would eventually turn less accommodative.

In China, the risk of policy tightening resulted in blue-chips suffering their biggest daily drop in nearly seven months.

Eyes therefore are on Lagarde’s speech at 1345 GMT where once again the ECB President is expected to sound dovish, and on Fed Chair Powell’s testimony later on Wednesday.

Fitting the recovery narrative is the speed of UK’s vaccination campaign and later today PM Johnson will to outline a roadmap out of lockdowns. Sterling in the meantime eased just below $1.40 but remained close to its April 2018 high.

Key developments that should provide more direction to markets on Monday:

* UK PM to plot a path out of lockdown on Monday in an effort to gradually reopen the battered $3 trillion economy

* German IFO

* Speech by ECB President Christine Lagarde 1345 GMT

* U.S.corporates: Occidental Petroleum

* Boeing recommends carriers halt some 777 flights pending FAA inspection

* European corporates: Avast, Galp

* Commerzbank expects to lose 1.7 million customers by 2024 as part of its current restructuring, Welt am Sonntag reports

* Top ASTM investor to launch a 1.7 billion euro takeover of Italian motorway group

Source: Read Full Article