Market Commentary – March 24, 2021

Kevin Jock

24th March 2021

    Testimony from U.S. Treasury Secretary Yellen and Federal Reserve Chair Powell tempered Wall Street’s optimism from Monday. Major indices declined with blue-chips Dow Jones underperforming slipping 1% whilst Nasdaq surprisingly held its ground. Both speakers re-iterated the same message, President Biden’s $19tn stimulus plan will assist America back to full employment by 2023 and the recovery thus far has progressed quicker than expected.

    On-going coronavirus woes left European benchmarks with consecutive days of decline. Yesterday, Germany announced an extension of lockdowns till April 18th as Chancellor Merkel considers more restrictive measures for Easter period. Meanwhile, AstraZeneca has been put on the defensive after an independent monitoring board claimed the drug-maker included outdated information to determine clinical trial results. The company said it will publish more data within the next 48 hours.

    Hong Kong is not without its own vaccine troubles following a surprise announcement by the government to suspend BioNtech jabs this morning. The partnering pharmaceutical group Fosun had informed the government of packaging defects but believes the vaccine itself is still safe. Upon reception, the Hang Seng tumbled another 2% today alongside the Nikkei down 1.5%.

    Majors fell against the dollar whilst the Turkish lira’s plunge cascades into a liquidity squeeze spilling over onto the swap market as rates soar 1,400% with investors all stampeding out of the door. Crude oil plunged 6.2% over oversupplied concerns resulting from renew lockdowns, gold weakens to $1,726 and bitcoin closes at $54,400.

Crude Oil-Mar-24-2021-07-28-12-21-AM

Figure 1 (Source: IS Prime) Crude Oil Daily : Oversupply worries see’s crude oil break below a medium term trend line amid renewed virus outbreaks.

Headliner to Review

  • The US Richmond Manufacturing Index rebounded to 17 in March this year, stabilizing at a six-month low of 14. It was slightly higher than market expectations16, reflecting that the expansion of manufacturing activities in the fifth district of the US has accelerated again.
  • The number of people applying for unemployment benefits in the UK in February this year rebounded from 20,800 to 86,600 month-on-month, ending the consecutive monthly decline. During the period, the registered unemployment rate rebounded by 0.3 percentage points month-on-month to 7.5%.
  • In the UK, average wages including dividends increased slightly to 4.8% year-on-year, which has repeatedly hit at least 13-year highs. It was not as good as market expectations for a 4.9% increase.
  • U.K. CPI data came out weaker than expected at 0.4% with 0.8% anticipated. Prices for clothing, second-hand cars, and games, toys and hobbies only to be partially offset by rising prices in housing, fuel and household services.

Headliner to Watch

  • Deluge of manufacturing and services data from the EU, UK and US.
    • EU manufacturing expected to decline from 57.9 to 57.5
    • EU services expected to increase from 45.7 to 46.1
    • UK manufacturing expected to decline from 55.1 to 55.0
    • UK services expected to increase from 49.5 to 51.1
    • US manufacturing expected to increase from 58.6 to 59.6
    • US services expected to increase from 49.5 to 51.1
  • Day 2 of Janet Yellen and Jerome Powell testimony continue before the Senate Banking Committee.

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Antony Tan
Ben Li
Kevin Jock