Market Commentary – March 9, 2021

Kevin Jock

9th March 2021

    Rotation out of tech in favour of companies well positioned to benefit from President Biden’s 1.9tn stimulus perpetuated the biggest divergence between the Nasdaq and Dow Jones Industrial Average since 1993. Tuesday saw valuation on Nasdaq tumble another 3% whilst the Dow rose 1% to all-time highs. Meanwhile, Treasury Secretary Yellen continues to bat away speculations additional pandemic relief will cause an eventual inflation problem, citing a lethargic labour market persist.

    In contrast the the West, the National People’s Congress saw Beijing announce goals to undertake both fiscal and monetary restraint in 2021 following a successful rebound from economic calamity. Despite vulnerability from rising yields, the Hang Seng has seemingly found support, rebounding from the 28,500 level the past 3 trading days. Elsewhere, the Japanese Nikkei edged higher following supporting sentiment from the BOJ. The deputy governor reiterated a dovish monetary stance whilst reassuring investors the central bank stands “nimble” to counter changing market conditions.

    Reflationary trade boosted Europe’s benchmarks higher, especially with the German DAX settling at record highs. Automobiles and banks outperformed on the prospect of returning to normality.

    The U.S. dollar gained for 3 consecutive days with the Turkish lira in focus depreciating 2.9% yesterday. Concerns are rising as the central bank continues to shy away from further interest rate hikes. Oil resumed lower after a failed attempt to disrupt Saudi Arabia’s production facility. Crude fell back below $65 in anticipation of U.S. stockpiles as refineries resume operation from the unprecedented arctic storm.

    Following a very public endorsement from Norwegian oil billionaire Kjell Inge Rokke, bitcoin surged to $54,000. Norway’s second richest stated, that bitcoin can “become the core of a new monetary architecture” and one day “be worth millions of dollars”.

DAX-2

Figure 1 (Source: IS Prime) IDX.DE.30 Weekly : Dax settles at records as investors pile on exposure set to benefit post-pandemic.

Headliner to Review

  • Japan’s Economy Watchers Sentiment in February this year ended its three-month consecutive decline, rebounded from an eight-month low of 31.2 to 41.3, a three-month high, far exceeding market expectations of 34.
  • Japan’s leading indicators in January this year rebounded to 99.1 again, the highest since September 2018, far exceeding market expectations of 96.8. The previous value was increased to only 97.7 for the first time in seven months.
  • In the fourth quarter of last year, Germany’s service industry turnover fell 5.4% year-on-year; the quarter-on-quarter was increased to 4.3%.
  • The Eurozone Investor Confidence Index returned to a positive value in March this year, rising sharply from -0.2 to 5, the highest since last February (5.2), far exceeding market expectations by 1.4.
  • In February of this year, the US Consultative Council Employment Trend Index (ETI) continued to rise from 99.69 to 101.01, rising for ten consecutive months and hitting an 11-month high.

Headliner to Watch

  • Despite a somewhat successful rebound, China is expected to post two consecutive months of deflationary data whilst PPI increases from 0.3% to 1.5%.
  • RBA Governor Philip Lowe will deliver a speech at the Australian Financial Review Business Summit titled “The Recovery, Investment and Monetary policy”.

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Authors:
Antony Tan
Ben Li
Kevin Jock