Stocks Drop From Record Highs; Yields Edge Higher

US stocks slipped from record highs while investors weighed the start of corporate earnings season and an influx of bond supply that loom as speedbumps to a roaring rally. The S&P 500 dropped by 0.02% to 4,127.99 while Dow Jones was down 55.20 points (0.16%) to 33,745.40.

US Budget Gap Hits Record US$1.7 Trillion for First Half of Year

The US federal budget deficit more than doubled to a record in the first half of the fiscal year amid a fresh wave of stimulus payments to cushion Americans from the persistent coronavirus pandemic. The deficit last month was US$659.6 billion, the third-largest on record and biggest since last June, swelling the total from October to March to US$1.71 trillion.

White House Says Coming Months’ Inflation Bump to be Transitory

The White House said inflation is likely to settle back down after a temporary acceleration in the next few months, as the Biden administration seeks to address Republican criticism that its stimulus plans will overheat the economy. Annual inflation is likely to rise in the coming months because of comparisons with year-earlier figures, supply-chain disruptions and pent-up demand for services.

EU Rescue Fund Chief Says 750 Billion-euro Aid Plan Is on Track

Klaus Regling, the managing director of the European Stability Mechanism, said the European Union economy doesn’t need more fiscal stimulus and the bloc’s recovery fund is on track to make its first disbursements on time this summer. Regling said policy makers at the IMF’s spring meeting had praised EU efforts to support the economy and he highlighted that the loan-guarantee programs used widely in Europe has supported bank lending equivalent to 17% of Gross Domestic Product.

French Economy Is Weathering April Lockdown Better Than Last Year’s

The French economy is slowing only slightly in April due to the tightening of Covid-19 restrictions, easing concerns that school closures would cause a deeper contraction. The Bank of France said activity will decline to 7% below pre-crisis levels in April after President Emmanuel Macron imposed stricter travel restrictions and ordered schools and nurseries to close. The hit to activity in March was 4%.

Japan’s Slow Vaccine Rollout Pushes Back Recovery Time Frame

Japan’s vaccination drive finally kicks into gear around four months after the start of inoculations in the US and the UK, a slow rollout that has generated further criticism of Prime Minister Yoshihide Suga’s handling of the pandemic. The doses for people 65 and over are the first vaccinations for members of the public in Japan after priority was given to inoculating frontline medical staff first.

India to See ‘k-shaped’ Recovery as Demand Hit, Ex-RBI Head Says

The Indian economy’s recovery is likely to be shaped like a K rather than a V, as rising inequality is poised to hit consumption and growth prospects, the country’s former central bank governor said. He noted that an important consequence of the pandemic has been the sharpening of inequalities. Growing inequalities are not just a moral issue. They can erode consumption and hurt our long-term growth prospects.

Oil Pares Gains With Demand Uncertainty Holding Rally Back

Oil pared gains with prices struggling to break out of its recent trading range as the market considers the jagged outlook for global fuel consumption. Brent crude for June settlement rose US$0.33 to US$63.28 per barrel.

Source: Affin Hwang Research - 13 Apr 2021