Market Commentary – March 15, 2021

Kevin Jock

15th March 2021

    Subdued start to Asia, as Australia, Japan and Hong Kong remain relatively unchanged preoccupied by rising long-term borrowing cost. Against a backdrop of 107 million vaccinated, a $1.9tn stimulus programmed on the way and continuing super-accommodative monetary policy, America’s S&P500 and Dow Jones ended strongly on Friday, marking consecutive days of gains. Tech yet to regain 2020 favoritism, down 0.9% as the once prevalent pandemic risk premium fades. Inflation expectations still a concern with US 10-Year yields reaching a 13-month high at 1.636%.

    Mixed Friday for Europe with France and Spain indices gaining 0.7% and 1% respectively, whilst Germany unchanged. Renewed worries over a recent spike in cases across the EU bloc’s following a relaxation of restriction measures Italy, Germany, Poland and Hungry facing a new of infections. Italy’s Prime Minister Mario Draghi has already placed much of the country back in lockdown, whilst several countries have suspended AstraZeneca COVID-19 shots after doctors reported formation of blood clots among some vaccinated. Britain declared China as a state of ongoing non-compliance over the Sino-British joint declaration after Beijing overhauled Hong Kong’s election system. China countered calling it groundless slanders.

    On Sunday bitcoin surpassed $61,000 before settling just above $60,000, practically doubling since the start of year and up 963% the past 12-months. The U.S. dollar index appreciated alongside oil prices and gold closes at $1,726.

    For the week ahead, the Federal Reserve will convene anticipated to discuss how to manage rising yield expectations. Likewise, the Bank of England faces the threat of a sharp rise in inflation expectations after a better-than-expected vaccination program. No change expected from the Bank of Japan, though the central bank will present its review of monetary policy strategy. Turkey too will be in focus, expected to raise rates to combat a lira already appreciating 8.9% this year.

Fra40

Figure 1 (Source: IS Prime) France40 Daily : Just 40 index points away from regaining ground made before COVID hit to join Germany in making all-time highs.

Headliner to Review

  • Canada’s job market sharply rebounded in February better than consensus. Number of people employed grew by 259.2K from -212.8K, whilst the jobless rate improved significantly from 9.4% to 8.2%. A large factor for the boost was the easing of public health restrictions early February that were put in place late December. Statistics Canada noted “this allowed for the re-opening of many non-essential businesses, cultural and recreational facilities and some in-person dining.”
  • As expected, China’s industrial production and retail sales roses sharply to 35.1% and 33.8% respectively. The substantial increase was largely attributable to the nation’s exponential recovery from last years pandemic as well as Lunar New Year.

Headliner to Watch

  • European figureheads will attend virtually for Monday’s Eurogroup meeting to discuss the structural changes resulting from COVID-19 and the state of play on fiscal support measures.
  • The RBA will release their monetary policy meeting minutes on Tuesday. Investors are keen to take a glimmer of the central banks outlook following this month’s expiration of the government’s job subsidies.

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Authors:
Antony Tan
Ben Li
Kevin Jock