A look at the day ahead from Julien Ponthus
One clear lesson from last week is that the European Central Bank hasn't been able to stop euro zone yields from rising. Germany's 10-year bond yield, the region's benchmark just made its biggest monthly gain since January 2018 with a 26 basis point rise.
Verbal intervention by ECB President Christine Lagarde, Chief Economist Philip Lane and board member Isabel Schnabel failed at keeping a lid on a rise that is pretty much imported from the U.S. where another round of stimulus, now on its way to the Senate, is fuelling inflation fears.
Rising yields currently seem less justified in the euro zone, which has a weaker economic outlook and arguably needs to keep borrowing costs lower for longer to secure its economic recovery.
So like the famous Elvis Presley song, pressure will grow for a little less conversation and little more action given there's almost 1 trillion euros left to spend in the ECB's PEPP arsenal.
Greece's Yannis Stournaras became the first ECB policymaker on Friday to openly call for increasing the pace bond purchases and we will soon find out if he's the only one in that mood.
Vice President Luis de Guindos, Bank of France Governor François Villeroy de Galhau, Irish central bank chief Gabriel Makhlouf and President Christine Lagarde are all speaking this afternoon.
In the meantime, yields on U.S. 10-year notes are back to 1.40% from last week's peak of 1.61% and markets seem set for an upbeat start to March with a rally coming out of Asia.
Japan's Nikkei rallied 2.3% overnight and futures for European blue chips and the S&P 500 are up 1% and 0.9% respectively with oil pricing rising over 1%.
The Australian dollar and other riskier currencies are also rebounding against the U.S. dollar.
There's good news on the pandemic front with the U.S. expecting deliveries of the newly approved Johnson & Johnson COVID-19 vaccine from Tuesday and this weekend's milestone of more than 20 million having received their first vaccine shot in the UK.
Key developments that should provide more direction to markets on Monday:
- BOE bank credit
- U.S. ISM manufacturing PMI
- U.S. 6-month bill auction
- Bank of France conference - 1500 GMT
- Fed speakers: Board governor Lael Brainard, 1405 GMT, Atlanta Fed’s Raphel Bostic, Cleveland Fed’s Loretta Mester, Minneapolis Fed’s Neil Kashkari at 1900 GMT; New York Fed’s John Williams 1400 GMT
- German Economics Minister Peter Altmaier, FDP chief Christian Lindner and ECB chief Christine Lagarde – 1600 GMT
(Reporting by Julien Ponthus)