Market Commentary – February 24, 2021

Kevin Jock

24th February 2021

    Words of reassurance from Jerome Powell fuelled an intra-day bounce back but not before benchmarks notched declines as low as 3.5%. The Federal Reserve Chairmen pushed back risk of overshooting inflation, citing “monetary policy is accommodative, and it continues to need to be…until we [The Fed] make substantial further progress towards our goals [full economic recovery]”.

    Whilst Powell’s remarks echoed across Europe, a third wave of coronavirus in Central Europe weighed in investors sentiment. Despite an on-going vaccination program, cases have spiked in the likes of Hungary, Poland, Serbia and Slovakia with a concerning portion of infection arising from either the British or South African variant. A rotation outside tech in the German DAX, further weighed down Euro Zone indices.

    Local media reports that the Hong Kong Exchange and Clearing would increase stamp duty on transactions spooked the Hang Seng lower by 2.5%. Elsewhere, Australia’s S&P200 lost all grounds gained from yesterday and the Nikkei down 1.2%.

    Following a tumble down to the $45,000 on Tuesday, bitcoin rebounds back above $50,000 after central figurehead Cathie Woods from Ark Investment appeared on Bloomberg noting she was still “very positive on Bitcoin” and “very happy to see a healthy correction here”.

    Ahead of Powell’s day 2 testimony before the House Financial Services Committee, the US dollar steadies itself among majors. Crude oil corrects to $61 after briefly touching $62.94 and gold unchanged.

Hang Seng-3

Figure 1 (Source: IS Prime) Hang Seng 1-min : After posting record annual profits of $1.48bn USD, rumours of increasing stamp duty on trades in the HKEX spook investors.

Headliner to Review

  • The US Consumer Confidence Index rose for two consecutive months in February this year, from 88.9 to 91.3, which was higher than market expectations of 90. During the period, the current conditions index stopped falling for three consecutive months, increasing from 85.5 to 92. However, in February, the expectation index stopped rising for several months, falling from 91.2 to 90.
  • The US housing price index (HPI) unexpectedly increased again to 1.1% month-on-month in December last year, and it has been rising for seven consecutive months. The market’s original expected increase has slowed slightly to 0.9%.
  • The US Richmond Manufacturing Index in February this year unexpectedly only stabilized at a six-month low of 14, which remained unchanged. The market had expected it to rebound to 16, reflecting the slow expansion of manufacturing activities in the fifth district of the US.
  • In the United Kingdom, the CBI retail sales gap in February this year deteriorated sharply, from an eight-month low of -50 in January, improving to -45, which was higher than market expectations of – 40.

Headliner to Watch

  • Deluge of testimony across the globe as central policy makers justify their prevailing monetary course.
    • BOE Governor Bailey to testify before the Parliament’s Treasury Committee
    • Fed Chair Powell to testify before the House Financial Services Committee
    • RBNZ Governor Orr to testify before the Parliament Select Committee

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Antony Tan
Ben Li
Kevin Jock