Market Commentary – March 2, 2021

Kevin Jock

2nd March 2021

    Following a turbulent week of volatility, the main focal point on Monday was Australia’s RBA intervening for consecutive days via doubling the size of regular bond purchases to $4bn. The decision has broader implications globally among central banks willing to step in and halt any fundamentally divergent selloffs. Evident last Thursday when ECB Chief Economist said the bank “will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions”.

    With investors shaking off concerns, Wall Street soared as the S&P500 post its biggest single day gain since June 2020 whilst the Nasdaq outperformed among the basket, gaining 3.2% for the session. President Biden’s 1.9tn stimulus now awaits a Senate vote, expected to be held Thursday this week.

    Likewise, ahead of Finance Minister Rishi Sunak budget statement on Wednesday, the FTSE100 regained 1.8%. An anticipated 300bn pounds for COVID-19 relief is expected to be announce in additional to tax cuts. Meanwhile, newly released vaccine data from Public Health England provide glimmers of hope for Europe’s infection dilemma. Both Pfizer or AstraZeneca has found to reduce hospitalization rates among people aged over 70 by around 80% as well as reducing the chance of infection by 60%.

    Coming into Asia, bubble warnings spooked markets after yesterday’s optimism with Australia’s S&P200 slipping 1% and the Nikkei off by 2%. Hong Kong’s overhaul of the Hang Seng failed to stifle the index’s decline, down 1.3% also. China Banking and Insurance Regulatory Commission Chairman Guo Shuqing at a briefing was heard saying he was “very worried” over the current level of international asset prices.

    Bitcoin rebounds back to $50,000 after Citigroup released a bullish report drawing a case where the cryptocurrency becomes the global choice of payment for international trade. Mixed results for the U.S. dollar, gaining on the euro and pound but depreciating against commodity currencies. Crude falls below $60 ahead of OPEC’s meeting with supply increase discussions on the table. And gold down 5-consecutive days to $1,725.

Gold-1

Figure 1 (Source: IS Prime) XAUUSD Daily : Worst month since 2016 as gold fails to hold major support level.

Headliner to Review

  • The US Manufacturing Purchasing Managers Index (PMI) in February this year unexpectedly increased slightly from 58.5 to 58.6, e highest since April 2010. It has expanded for ten consecutive months. The market’s expectation confirmed is 58.5.
  • The US ISM manufacturing index rebounded to 60.8 in February this year, a three-year high, far higher than market expectations of 58.8. It has been expanding for nine consecutive months.
  • Canada’s current account deficit fell for five consecutive years in 2020, but the year-on-year decline narrowed again to 9.94% to 42.673 billion Canadian dollars, which was the lowest since 2008.
  • Japan’s unemployment rate in January was 2.9%, which was lower than market expectations of 3%. It rose 0.6% year-on-year without adjustment. During the period, the employment participation rate fell by 0.2 percentage points month-on-month to 61.8%.
  • The UK Manufacturing Purchasing Managers Index (PMI) in February was increased to 55.1, which was higher than market expectations of 54.9. It rose for nine consecutive months and hit a two-month high.
  • As expected the RBA kept policy rates unchanged, reiterating their stances that no hawkish endeavours will be considered until actual inflation is sustainably between 2-3%.

Headliner to Watch

  • Canadian month on month growth expected to slow from 0.7% to 0.1% as Trudeu’s COVID-19 restrictions impact businesses
  • Australian quarterly GDP expected to hit 2.3%. Despite, growing political tension, Australia continues to benefit from China’s rebound with well over one-third of exports still going to China.

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Authors:
Antony Tan
Ben Li
Kevin Jock