Market Commentary – March 5, 2021

Kevin Jock

5th March 2021

    Words of reassurances from Federal Reserve Chairmen Jerome Powell falling short on definitive policy actions left Wall Street jittery. Following Powell’s remarks, 10-year Treasury yields immediately spiked to 1.57% whilst US benchmarks rolled over with Nasdaq ahead in declines down 2.11%, the Dow and S&P500 losing just over 1% in market cap. Amid Wall Street Journal’s online forum, the Fed Chief stressed their “current policy stance is appropriate” and will remain “patient”.

    The opening session of the National People’s Congress saw China set a conservative growth target above 6% whilst economist consensus predicts 8.4% for 2021. Meanwhile, President Xi revamps Hong Kong elections with a twist. Calling for “patriots” to run and limiting opposition parties from winning public office. Across to the west, Biden’s administration re-affirmed their tough stance towards China though recent polling found only 53% American believe the President will pull through. The Hang Seng initially gapped lower by 3.8%, however has since recovered back throughout Asia’s session.

    Yield woes continue to push European markets lower and likewise Australia’s S&P200 and the Japanese Nikkei suffered the same fate.

    OPEC’s meeting concludes with a surprise no-action, boosting crude above $64. Given the recent rise in crude oil prices, investors anticipated piecemeal steps towards ramping up productions to cool an overheat asset, especially as China’s fuel consumption recovered to pre-pandemic levels. However, was instead met with unanimous agreement to hold steady current levels.

    Founder of Kraken exchange Jesse Powell failed to stem Bitcoins’ recent slump as the cryptocurrency hits $47,000 intra-day. In a Bloomberg TV interview, the CEO speculated bitcoin could reach $1 million within a decade and that “you have to have conviction to hold”.

    Alongside rising bond yields, demand for the U.S. dollar surges amongst majors with the likes of the USDJPY settling above 108.00. Elsewhere, gold post consecutive days of losses, closing below $1,700.

Crude Oil-Mar-05-2021-05-38-41-34-AM

Figure 1 (Source: IS Prime) Crude Oil 1-Minute : Shock agreement by OPEC members to refrain from production increases saw crude rocket from $62 to above $64.50.

Headliner to Review

  • The number of people claiming unemployment benefits for the first time in the United States for the week ended February 27th stopped falling for two consecutive weeks, increasing by 9,000 people to a total of 745,000, which was still the lowest in the past three months. The market’s expectation was 750,000.
  • The durable goods orders in the United States in January this year confirmed that the monthly increase has again expanded from 1.2% to 3.4%. It has been rising for nine consecutive months.
  • The number of U.S. companies planning to lay off workers in February dropped by 56.59% month-on-month to only 34,531 people, ending two consecutive months of rising.
  • Canada’s labor productivity in 2020 increased sharply year-on-year to 8.8%, the best since 1981. The main reason is that productivity in the first two quarters of last year increased significantly, which offset the decline in productivity in the third and fourth quarters.

Headliner to Watch

  • All eyes on U.S. jobs market data today. Yesterday saw the U.S. senate pass a top-up $1.9tn stimulus, expected to positively reverberate through the economy. Non-farm employment change is expected to add another 197k, whilst the unemployment rate stays at 6.3%. Implying more American’s are confident in finding work.

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Authors:
Antony Tan
Ben Li
Kevin Jock