Market Commentary – March 19, 2021

Kevin Jock

19th March 2021

    Wall Street reversed Wednesday’s gains defying the Federal Reserves’ rhetoric with 10-year yields soaring back above 1.7% to a 14-month high. Risk was further heightened ahead of quadruple witching on Friday where simultaneously expiration of varying futures and options will occur. Meanwhile, the first face-to-face meeting between high level US – China officials got off to a rocky start in Alaska. U.S. Secretary of State went on the offensive, bringing to the forefront China’s involvement in cyber-attacks, minority mistreatment and control over Hong Kong. Considering the start, expectations have plummeted for a potential Biden – Xi meeting in April.

    String of cascading lockdowns across Europe spooked risk-on appetite, with France being the most recent, putting Paris and few other regions under strict lockdown for a third time. Whilst a hitch in the supply lines for the U.K. is to derail Britain’s vaccination schedule after delayed a from India. On a positive note, German, France, Italy and Spain will resume their jab of AstraZeneca’s vaccine following the EU drug regulator reiterating it’s safety.

    Markets across the Asia-pacific slid following overnight U.S. sentiment. The Hang Seng down 450 index points as Hong Kong battles its 5th wave with some criticising the inhumane containment measures taken. Likewise, the Nikkei slipped 290 index points after the BOJ released its monetary policy review. Governor Kuroda attempted his best to avoid any hawkish impressions but failed nonetheless.

    Alongside surging yields, demand for the U.S. dollar grew on Thursday across the board. An outlier being the Turkish Lira, appreciating 2.3% after the central bank unexpectedly raised rates by 200 basis points to 19% in an attempt to tame inflation. Crude oil tumbled over $4 to $59.47 over concerns the market is over-pricing rising demand fuelled by a global campaign to vaccinate and fiscal stimulus. Gold slipped slightly, whilst bitcoin was unchanged.

Crude Oil-Mar-19-2021-07-35-47-10-AM

Figure 1 (Source: IS Prime) Crude Oil 1 min : Demand jitters and over-pricing concerns saw crude oil display a decline unseen since October.

Headliner to Review

  • The number of people claiming unemployment benefits for the first time in the United States for the week ended March 13 rebounded by 45,000 weekly to a total of 770,000 (the previous value was 725,000). The market expected to fall to 700,000.
  • The US Consultative Council’s Leading Economic Indicators (LEI) rose for ten consecutive months in February, but the monthly increase dropped to 0.2% to 110.5, which was lower than market expectations of a 0.3% rise. During the period, The Coincident Economic Index (CEI) declined by 0.1% on a monthly basis (the previous value rose by 0.2%) to 103. The Lagging Economic indicator (LAG) rebounded by 0.2% month-on-month (the previous value dropped by 2.3%) to 104.5.
  • Japan’s February consumer price index (CPI) continued to decrease by 0.4% (previous value decrease of 0.6), showing deflation for the fifth consecutive month, in line with market expectations.
  • Bank of England leaves Official Bank Rate at 0.1% and maintain its Asset Purchase Facility at 895 billion.

Headliner to Watch

  • Retail sales in Canada expected to contract a consecutive month at -3.0% over COVID restrictions. As long as measures remain in place, business activity will remain constrained.

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Authors:
Antony Tan
Ben Li
Kevin Jock