Market Commentary – March 22, 2021

Kevin Jock

22nd March 2021

    US – China relations unlikely to improve in the near-term after two days of negotiations ended Friday with no material concessions from either side. Especially after Thursday’s start where U.S. secretary of state and Beijing’s foreign ministers held their “tough” rhetoric hurling accusations at each other. The S&P500 and Dow Jones weakened as investors continue to digest the Federal Reserve’s meeting, while Nasdaq manage to notch itself bull territory with treasury yields holding steady.

    Outlook across Europe worsen as fresh lockdowns from France, Italy, and Germany bite down growth prospects. Previous forecast had assumed a gradual easing of restrictions in March, however had since been revised to accommodate the current third wave, pushing lifting restriction towards the end of Q2. Vaccination delays also weighed on European markets with Boris Johnson pleading to other EU nations in vetoing Brussels plans to black vaccine exports to the U.K.

    Asia opened upbeat as both Australia and Hong Kong rallied though the Nikkei declined 1.1%. Further clarity from the BOJ depicts plan to chip away at 6tn yen in yearly equity purchases launched 6 years away, as they deem it unsustainable.

    Crude oil rebounds losses on Friday to close above $61. Last week saw volatility spike in the commodity as two opposing forces clash. Whilst an uneven global pandemic recovery drew concerns over sustained demand in coming months, Saudi Arabia’s Aramco refinery was victim again to another assault by Houthi rebels. Though the series of latest attack did not affect oil production.

    Whilst the dollar index capped the week’s end higher, the Turkish lira grabbed headlines on Monday open, following the shock sacking of their central bank chief early Saturday morning. Naci Agbal has been the third governor in less than two years, appointed to fend off the country’s ever-growing risk of hyperinflation. However, last week’s surprise 200 basis rate rise irked President Erdogan’s, of whom believe there is no relationship between inflation and interest rates. The USDTRY gapped higher 16% on open.

    Elsewhere, gold finds support at the $1,730 level and bitcoin finds equilibrium around $58,000 since attempts to break above $60,000 failed.

USDTRY-Mar-22-2021-05-32-23-10-AM

Figure 1 (Source: IS Prime) Crude Oil 1 min : Hard-work all for naught as the USDTRY gaps back to levels before Naci Agbal’s appointment.

Headliner to Review

  • Geoffrey Okamoto, deputy director general of the International Monetary Fund (IMF), said that the organization will raise its forecast for global economic growth of 5.5% this year in April, reflecting the additional fiscal stimulus policies of the United States. He is concerned that the growth gap between advanced and emerging economies has widened, and more than 90 million people have fallen into extreme poverty since the coronavirus pandemic.
  • Russia’s gross domestic product (GDP) contracted for the tenth consecutive month in February this year, and the year-on-year contraction rate deteriorated again by 2.8% (the previous value contraction by 2.4%, the lowest in nine months).
  • Germany will obtain a supplementary budget of more than 60 billion euros through debt financing, so that the government’s debt will reach a historical high of more than 240 billion euros during the year to respond to the local epidemic.

Headliner to Watch

  • Various Federal Reserve members are expected to at varying events.
    • Fed Chair Powell will participate In an virtual panel about central bank innovation host by BIS.
    • Richmond President Barkin is attending an online event hosted by Maryland Bankers Associations
    • San Francisco President to speak online regarding the future of education
    • Governor Randal Quaries due to speak about Libor’s transition
    • Governor Bowman will speak about the economic outlook for small businesses at the Oklahoma City Economic Club.

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Authors:
Antony Tan
Ben Li
Kevin Jock