Market movers today

April Flash PMIs are released both for the Euro Area as well as the US. Following strong readings in Q1, we would not be surprised to see Euro Area Manufacturing PMI fall back slightly in line with trends observed in China.

The Central Bank of Russia also has a meeting today, consensus expects a 25 basis point hike.

Finally, ECB president Lagarde will give a speech in the afternoon.

The 60 second overview

US: US President Joe Biden is said to plan to almost double the capital gains tax rate to 39.6% on high incomes (people earning USD 1 million). The 3.8% tax on investment income that funds Obamacare would stay. Hence, investors would see a rise in the capital gains tax to as high as 43.4%.

ECB: The ECB meeting concluded today was not a 'significant' meeting, with no new signals leaving many decisions for the June meeting. Near-term growth outlook was 'tilted to the downside' while the medium-term growth risk was 'broadly balanced'. The latter has paved the way for a lower PEPP volume to be agreed at the June meeting.

Equities: Equities lower yesterday but with big divergence across regions. Growth and defensive in small outperformance though spilt between sectors and styles relatively limited yesterday. VIX back up again yesterday after it softened Wednesday. In US Dow -0.9%, S&P 500 -0.9%, Nasdaq -0.9% and Russell 2000 -0.3%. Asian markets are mixed this morning with Japanese stocks underperforming despite some solid macro releases this morning. Countries suffering from high covid-19 infections generally underperforming. US futures in green while European futures are in red.

FI: While European rates were in a tight range for most of the day, the EGB rates were relatively volatile from the start of the ECB press conference. Initially core rates sold off to touch -0.24% on the back of Lagarde's comment that the significantly higher volume was already implemented after the March ECB meeting. That left markets somewhat disappointed of the 'significant' volume. However, the sell-off was reversed as Lagarde said that ECB and Fed are 'not on the same page' taking 10y German rates 4bp lower from the peak. Ultimately, EGB rates mostly up by 1bp on the day, with spread tightening core rates and periphery/semi-core as ECB is still going to buy a sizeable amount of bonds. Based on the recent purchase behaviour, when adjusting for the number of trading days, the 'significantly' higher volume is around 30%. 

FX: For EUR/USD, the ECB meeting was in itself quite uneventful, as expected. Today, focus will turn to European PMIs and notably the manufacturing side. For spot FX, the key focus will probably be if manufacturing PMIs improve further or turn lower. A negative surprise in the latter will likely have the potential to take EUR/USD below 1.20, irrespective of improvement in services sentiment.

Credit: Only small moves in credit yesterday where iTraxx Xover widened ½bp (to 252bp) and Main was unchanged at 51bp. Both HY and IG was broadly unchanged.

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