Market Commentary – March 8, 2021

Kevin Jock

8th March 2021

    President Biden is on the cusp of securing his first major political victory since being elected as the U.S. Senate on Saturday voted to approve the 1.9tn stimulus. The package now awaits a final greenlight from the House of Representatives on Tuesday before the legislature is signed by the president.

    Asia began with heavy selling pressure as global indices and futures tumbled on opened. Whilst fiscal relief herald’s greater economic recovery prospects, so too would it reignite current angst surrounding the prevailing government bond sell-off alongside risk of overshooting inflation. Both Australia’s S&P200 and Japanese Nikkei fell 75 and 586 index points thus far respectively. The Hang Seng is set to close at a monthly low. Meanwhile, the increasing geopolitical tensions between US – China does Hong Kong no favors. Recent rhetoric from a top Chinese diplomat warned Biden’s administration to stop “playing with fire” in China – Taiwan affairs.

    Wall Street benefited from a rebounded last Friday as investors sought value amid the intensifying equity sell-off. Nonetheless, benchmarks still ended the week in negative territory with the Nasdaq suffering 3 consecutive weeks of declines. In contrast, European indices performed exceptional with the French CAC closing at yearly highs and the German DAX 74 points shy from its all-time high.

    A series of attacks on Saudi Arabia’s most protected oil facility on Sunday, Saudi Aramco at Ras Tanura, sent crude prices above $67. The terminal accounts for 7% of global oil supply, approximately 6.5m bpd. Iranian-backed Yemen Houthis has claimed the attacked, albeit the missile and drone barrage resulted in minimal damage such that production was unaffected.

    From a low of 89.44 back in January to 91.98, the U.S. dollar index recovers back to levels seen in December. Though yields are surging across the globe, U.S. Treasuries far outpace that of developed counterparts. Luring demand for the American greenback. Gold managed to regain the 1,700 level and bitcoin back to $50,500.

Crude oil-Mar-08-2021-06-38-40-85-AM

Figure 1 (Source: IS Prime) Crude Oil Weekly : Crude breaks past major historical resistance to levels untouched since 2018 following a series of supply shocks.

Headliner to Review

  • In the United States, non-farm employment increased by 379,000 in February, which was higher than market expectations of 182,000. During the period, the unemployment rate fell by 0.1 percentage point to 6.2%, which was the second consecutive month of decline. The market expected to maintain at 6.3%.
  • The Democrats of the U.S. Senate reached an agreement on unemployment assistance arranged in the US$19,000 anti-epidemic stimulus package, allowing the plan to advance after several hours of delay.
  • The British financial regulator announced that all London Interbank Offered Rates (LIBOR) will be suspended at the end of the year, forcing global 260 trillion US dollars contracts to switch to other reference index rates, covering residential mortgages, corporate loans and credit cards. The interest rate will be replaced by the interest rate set by the central bank.
  • Canada’s Ivey Purchasing Managers’ Index (PMI) in February this year increased for the first time in three months, rising from the previous value of 48.4 to 60. The growth rate was the highest in six months and was much higher than the same period in the past year at 54.1.

Headliner to Watch

  • BOE Governor Andrew Bailey is expected to give a speech on England’s economic outlook during an online webinar hosted by the Resolution Foundation think tank. Recent remarks by the central bank chief noted he expects a negative 1st quarter due to their nations third lockdown, however expected a dramatic rebound by years end as households spend their built-up savings.

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Authors:
Antony Tan
Ben Li
Kevin Jock