Market Commentary – March 10, 2021

Kevin Jock

10th March 2021

    Supposed short-covering fuelled Nasdaq’s 3.7% rebound yesterday altering the prevailing theme of a value/growth rotation to just a market correction story. Meanwhile as treasury yields pull back after reaching pre-pandemic levels, the S&P500 posted a +1.1% day whilst the Dow Jones remained mute. Once President Biden signs the $1.9tn pandemic relief bill, the White House is anticipated to unveil their “build back better”, a long-term economic stimulus package. However, unlike the current bill, Biden faces an uphill battle as one dissenting Democrat Senator from West Senator has warned the administration to put in more effort in ensuring a bi-partisan support as oppose to steamrolling through preceding’s.

    A very angry public row between the EU and UK regarding COVID-19 vaccine distribution saw PM Boris Johnson denounce Brussels accusations that the UK imposed an export ban “an outright lie” and “any references to a UK export ban or any restrictions on vaccines are completely false”. Thus far, the EU bloc has only averaged 9.4 doses per 100 residents whilst the US and UK a respective 27.8 and 35.2. Geo-political strife weighed down the FTSE100 whilst European benchmarks posted their 3rd consecutive days of gains.

    In Asia, Australia’s S&P200 loss ground despite attempts by the RBA to push back current expectations amid the Australian Financial Review Business Summit. Central bank chief Philip Lowe said “over the past couple weeks market pricing has implied an expectation of possible increases in cash rate as early as late next year…this is not an expectation that we share”. Elsewhere Japan edged 0.4% lower and the Hang Seng down 0.8%.

    Bitcoin climbs back to $55,800 today on the back of further purchases from MicroStrategy and Meitu defying recent criticism from former Citigroup Chief Economist likening the cryptocurrencies nil intrinsic value to Schrodinger’s Cat.

    Most majors gained against the U.S. dollar, crude retraces back to $64 after hitting a high of $67.94 on Monday and gold bounces above $1,700.

Indices

Figure 1 (Source: IS Prime) Wall Street Daily re-based to 1 : As favourability for tech stagnates, the divergence between Nasdaq and growth whittles away.

Headliner to Review

  • Unexpected, better than forecasted inflation data out of China with CPI at -0.2% compared to an analyst consensus of -%0.3. Likewise, PPI data stood at 1.7% compared to 1.5%. A recovering exports industry is said to be a large of February’s figures.
  • GDP data revised lower in Europe from -0.6% to 0.7% for Q4 2020 where much of the economy was restricted via lockdowns. Nonetheless, more leading economic indicators, such as Italy’s industrial production reveal the bloc’s pace of recovery is faster than previously though.
  • Despite, government worker subsidies expiring at the end of March, consumer sentiment index still depict Australian’s to minutely optimistic about their future.

Headliner to Watch

  • Inflationary pressures expected to pick up pace in America with February figures to increase to 0.4% from 0.3%. And with stimulus to disseminate across the nation, price increases are set to remain.
  • Bank of Canada to leave rates unchanged in today’s Monetary Policy meeting however speculation sees a scenario where Governor Tiff Macklem will set out plans to pare back quantitative in the latter half of 2021.

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Authors:
Antony Tan
Ben Li
Kevin Jock