Rekindled concerns in global Treasury markets saw Wednesday yields resume last week’s endeavours, dragging broad-based benchmarks lower. 2021 began with revisions of a bigger than forecasted economic recovery, turned into fears of overshooting inflation and now a risk of liquidity drying up. Recent Treasury auctions saw little demand from secondary participants with primary dealers forced to pick up 40% of the sale, unseen for 7 years.
Mixed messages from various central bank members across the global have done no favours. Opinions differ from the ECB having flexibility to act if yields from the real economy to the Chicago Fed’s view that the recent rise was healthy. Investors hope Powell will offer some clarity when he speaks about the state of the American economy before a virtual summit hosted by Wall Street Journal.
Among Wall Street, Nasdaq continues to unperformed, down over 3% as the rotation out of tech intensified in favour of cyclicals set to benefit from Biden’s 1.9tn stimulus arrangement. Though the legislative bill did a hit snag yesterday. With a Senate floor split 50-50 and Republicans united, two vocal Democrats have argued for the package to be more targeted. Elsewhere, European indices fell flat whilst the UK’s Chancellor’s budget deliver failed to stoke enthusiasm in the FTSE100. Asia extended overnight sentiment with Australia, Hong Kong and Japan tumbling lower.
The price of gold continued to be under pressure near the 9-month low but rebounded to around $1,702. Despite signs of an inventory build up and OPEC anticipated to curb production restraints, crude oil still surged above $61. Meanwhile, bitcoin fails to sustain above $50,000, falling back down to $49,500 this session.
The closing of major currencies on March 3:EUR/USD closed at 1.2062; GBP/USD closed at 1.3948; AUD/USD closed at 0.7772; USD/JPY closed at 107.01; USD/CAD closed at 1.2656; USD/CHF closed at 0.9198. All in all, the greenback gained, hitting a 7-month high against the Japanese yen along with a 3-month high on the Swiss franc.
Wall Street latched onto bubble warnings from China’s Chairman of banking and insurance commission, driving broad-based benchmarks lower across the board. Guo Shuqing comment he was “worried the bubble in foreign financial markets will one day pop” pointing to ultra-loose monetary policy in US and European markets resulting in a divergence with the real economy. Bank of America echoed similar concerns as their proprietary contrarian indicator revealed Wall Street near extreme bullishness.
Meanwhile, reassurances from several ECB officials prevented losses on Europe’s indices. Board member Fabio Panetta remarked on the recent spike in Treasury yields “is unwelcome and must be resisted”. ECB Vice-President Luis de Guindos echoed similar sentiments, sounding the bank has “the flexibility that is needed in order to react” should any unwarranted yield levels undermine the economy.
Mixed start in Asia with the S&P200 and Hang Seng rallying 0.6% and 1.6% respectively on open. The Nikkei remained unchanged weighed down by Tokyo’s Governor Yuiko Koike requesting an extension to the coronavirus state of emergency.
Gold touched on an 8-week low before recovering to end in positive territory at $1,738. In the face of rising yields, appeal for a non-interest paying asset has been lacklustre as well as increasing competition from the likes of bitcoin seen as a better alternative to hedge inflation risk.
Among majors, the U.S. dollar has become less enticing as long-dated Treasury yields have now reached back to pre-pandemic levels. Crude dipped below $60 after the American Petroleum Institute reported a build in inventories. And bitcoin fluctuates around the $49,000 level.
Following a turbulent week of volatility, the main focal point on Monday was Australia’s RBA intervening for consecutive days via doubling the size of regular bond purchases to $4bn. The decision has broader implications globally among central banks willing to step in and halt any fundamentally divergent selloffs. Evident last Thursday when ECB Chief Economist said the bank “will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions”.
With investors shaking off concerns, Wall Street soared as the S&P500 post its biggest single day gain since June 2020 whilst the Nasdaq outperformed among the basket, gaining 3.2% for the session. President Biden’s 1.9tn stimulus now awaits a Senate vote, expected to be held Thursday this week.
Likewise, ahead of Finance Minister Rishi Sunak budget statement on Wednesday, the FTSE100 regained 1.8%. An anticipated 300bn pounds for COVID-19 relief is expected to be announce in additional to tax cuts. Meanwhile, newly released vaccine data from Public Health England provide glimmers of hope for Europe’s infection dilemma. Both Pfizer or AstraZeneca has found to reduce hospitalization rates among people aged over 70 by around 80% as well as reducing the chance of infection by 60%.
Coming into Asia, bubble warnings spooked markets after yesterday’s optimism with Australia’s S&P200 slipping 1% and the Nikkei off by 2%. Hong Kong’s overhaul of the Hang Seng failed to stifle the index’s decline, down 1.3% also. China Banking and Insurance Regulatory Commission Chairman Guo Shuqing at a briefing was heard saying he was "very worried" over the current level of international asset prices.
Bitcoin rebounds back to $50,000 after Citigroup released a bullish report drawing a case where the cryptocurrency becomes the global choice of payment for international trade. Mixed results for the U.S. dollar, gaining on the euro and pound but depreciating against commodity currencies. Crude falls below $60 ahead of OPEC’s meeting with supply increase discussions on the table. And gold down 5-consecutive days to $1,725.
Hong Kong investors today welcomed news that the Hang Seng will undergo a major overhaul. The index is anticipated to increase the number of constituents, cap the weightings of individual companies and ease listing criteria in hopes to dilute the sway of any individual stock price. Following industry consultation, concerns arose over the growing influence of mainland megacap’s on the benchmark particularly as the HKE has become the preferred destination to list.
Meanwhile, the Nikkei rallied 1.3% as the government announces ending its state of emergency early for 6 prefectures early after COVID-19 infections came under control. Leading economic indicators in housing and joblessness fuelled Australia’s S&P higher by 0.8%. Job advertisements in Australia is currently at 2 and half year highs alongside house prices recorded their biggest monthly gain in 17 years, soaring 2.1%.
Friday saw Nasdaq hold a previous support level at 12,800, whilst elevated Treasury yields continue to impact cyclical firms weighing down the S&P500 and Dow. Bond jitters did not spare U.K and European counterparts. The FTSE100 underperformed among the lot, declining 1.4% .
Nonetheless, optimistic news over the weekend with the Democratic-controlled House passing President Biden’s $1.9tn additional relief aid. The bill now awaits a Senate vote, where the floor is currently split 50-50 between Democrats and Republicans with the Vice-president casting the tie-breaker vote.
Since reaching an all-time at $58,354 back on February 21st, bitcoin has fallen 26% touching $43,165 on Sunday. Elon’s tweet “That said, BTC & ETH do seem high lol“ which initiated the decent remains on Twitter.
The US dollar index extends its advance against majors as investor’s pull speculation closer that the Fed could turn hawkish as early as next year. Crude still above $62, though gold tumbles $36 to $1,734
Surging Treasury yields unnerve risk appetite as Wall Street sees mass exodus in market exposure. The 10-year yield spiked to 1.6%, a 1-year high following exceptional U.S. jobs data indicating an economic recovery is gaining speed. In turn, yesterday’s Treasury auction received a sub-par participation rate further fuelling rising rates. Rotation out COVID-19 beneficiaries towards companies set to profit from Biden’s 1.9tn stimulus package saw Nasdaq tumble 3.6% whilst similar counterparts suffered only 2.5% losses.
European indices fared no better suffering from a yield curve steepening situation of their own. Pharmaceutical company leaders were put through the ringer on Thursday as EU legislators voiced their frustration over vaccine exports to the US and UK. As a result, the pace of the EU immunisation campaign has thus far been lacklustre. The current inoculation rate stands at 6.6 shots per 100 residents when compared to 20.1 and 28.3 with the US and UK.
Overnight risk-off sentiment contagion spread throughout Asia as benchmark continues U.S. declines. So much so, Australia’s central bank had stepped in today to make an unscheduled $3bn purchase in 3-year government to suppress flare up in yields. Nonetheless, the S&P200 still declined 98 index points, the Hang Sang gapped 1.6% down on open and the Nikkei lower by 1.9%.
Bitcoin heads towards one of the worst performing weeks, down 20% so far. Initially set off by Elon Musk’s tweet suggesting prices are too high, the premium held on top of the cryptocurrencies decentralized status is evaporating.
Favourability returns to the U.S. dollar gaining against a basket of majors as investors position for yield. Crude oil remains unaffected settling at $63.40, though gold declined sharply to a previous support level at the $1,760 mark.
Second day of testimony by Jerome Powell, saw the Federal Reserve Chairmen nip elevated inflation risk in the bud. Powell emphasized “policy is accommodative because unemployment is high and labour market is far from maximum employment” whilst rising inflation does not equate its persistency towards the medium term.
A sigh of relief on Wall Street with investors welcoming the Fed’s remarks as the Dow 30 surges 1.4% into all-time highs. Meanwhile, the Treasury market is not buying it with the 10-year yields edging to a 1-year high at 1.39%. Whilst the U.S. dollar depreciates against a basket of majors like the AUDUSD, up 56 pips and just a touch below the 0.80 level.
Benchmarks across Europe ended in positive territory with the French CAC outperforming to levels untouched since 2020 February. Breaking news from Moderna revealed the first vaccine designed to target the South African variants with clinical trials set to begin in coming days. Elsewhere, overnight sentiment seeped into Asia as indices cautiously pointed higher.
In focus today, the Turkish Lira slipped as much as 1,466 pips intra-day following the central bank’s less hawkish decision to increase reserve requirements as opposed to an outright increase in policy rates. Investors fear pressure from President Erdogan, whom is of the belief rate hikes is an inappropriate course of action in fighting inflation, is overshadowing the bank’s decision making.
Following a no-change rate decision, the New Zealand government has announced the RBNZ will now consider house prices as an additional objective to monetary policies. The government hopes to reign in on the booming housing market which has seen 8 consecutive monthly increases averaging 2.2% a month. In response, the Kiwi rose 96 pips to 0.7435 as investors push forward more hawkish expectations.
Crude higher to $63.40, gold unchanged and bitcoin bounces back above 50,000.
Words of reassurance from Jerome Powell fuelled an intra-day bounce back but not before benchmarks notched declines as low as 3.5%. The Federal Reserve Chairmen pushed back risk of overshooting inflation, citing “monetary policy is accommodative, and it continues to need to be…until we [The Fed] make substantial further progress towards our goals [full economic recovery]”.
Whilst Powell’s remarks echoed across Europe, a third wave of coronavirus in Central Europe weighed in investors sentiment. Despite an on-going vaccination program, cases have spiked in the likes of Hungary, Poland, Serbia and Slovakia with a concerning portion of infection arising from either the British or South African variant. A rotation outside tech in the German DAX, further weighed down Euro Zone indices.
Local media reports that the Hong Kong Exchange and Clearing would increase stamp duty on transactions spooked the Hang Seng lower by 2.5%. Elsewhere, Australia’s S&P200 lost all grounds gained from yesterday and the Nikkei down 1.2%.
Following a tumble down to the $45,000 on Tuesday, bitcoin rebounds back above $50,000 after central figurehead Cathie Woods from Ark Investment appeared on Bloomberg noting she was still “very positive on Bitcoin” and “very happy to see a healthy correction here”.
Ahead of Powell’s day 2 testimony before the House Financial Services Committee, the US dollar steadies itself among majors. Crude oil corrects to $61 after briefly touching $62.94 and gold unchanged.
Wall Street echoes Monday’s losses as inflation expectations continue to rise alongside a potential commodity super cycle in the making and its impact to the real economy. Broad rally in metals saw the likes of copper soar to $9,000 a metric ton, a 9-year high. Rotation out of big-tech left Nasdaq underperforming suffering a 2.8% decline as the premium held during the pandemic subsides.
UK’s FTSE100 up 0.5% as investors celebrate PM Boris Johnson’s four-step road map to ease all social restrictions by mid-June. Meanwhile, to ensure the economy does not double dip, Chancellor Rishi Sunak will extend the governments coronavirus furlough scheme into Summer. Across the channel, European benchmarks were buoyed by remarks from ECB President Christine Lagarde whom said the central bank has a close eye on the current upward trajectory in bond yields. Alluding to potential intervention in the future.
Value-seeking in Asia spurred Australia’s S&P200 to rally 72 index points on open. Largely benefiting from booming commodity prices. Likewise, the Hang Seng gained 1.9% with the Hong Kong government budget deficit set to hit record highs following cash handouts to households and businesses.
Much like how Elon’s tweet propelled bitcoin to records and the subsequent adoption into Tesla’s balance sheet. Elon’s hubris, tweeting prices of Bitcoin “do seem high” pulled the rug beneath the cryptocurrency’s feet as it tumbled from an intraday high of $57,646 to $47,476 within minutes.
Ahead of Jerome Powell’s testimony before the Senate Banking Committee, the U.S. dollar hits a 1-month low in anticipation the Fed Chair would reassure that the central bank will tolerate above norm inflation levels before considering hawkish endeavours. Gold rebound banks above $1,800 whilst crude hits $62.50.
Inflation rhetoric back on the menu with Wall Street broad-based benchmarks ending the week lower. Whilst expectations see a combination of vaccines and additional stimulus spurring on a global economic recovery, worries remain over runaway inflation halting progress. Especially as the 10-year Treasury yield climb to 1.39%, a 1-year high.
Buoyed by upbeat quarterly earnings, European indices defied global sentiment to post positive gains. Confidence was further reassured by immunization data coming out of Israel, depicting Pfizer’s COVID-19 shot at effectively curbing transmission of the virus. Meanwhile the UK’s FTSE100 slipped just under 20 index points. Nevertheless, good news ahead as PM Boris Johnson is expected to lay out plans on Monday regarding the easing of social restrictions.
Cautious start across Asia with Australia, Japan and Hong Kong failing to hold their initial rallies on open. This despite a report released by Deloitte surveying Australian CFO’s, 72% of whom feel optimistic for 2021 and vaccinations moving ahead of schedule as PM Scott Morrison were among the first patch to receive the shot. Likewise, announcement out of HSBC reveals executive relocation to Hong Kong this year as the global bank see’s the special territory as the future epicenter of revenue.
Bitcoin notches new highs over the weekend to record 58,354, gaining just under 20% last week, approximately doubling its value since the start of the new year and topping $1tn in market capitalization. The cryptocurrencies rise in value came alongside mainstream acceptance of utility as an alternate form of payment.
U.S. dollar loses risk-on status as the Greenback retreats on Friday alongside an increase in global yields. Early Asia session saw the Kiwi dollar soar 50 pips to 0.7338 on the back of rating firm S&P rewarding New Zealand efforts in successfully containing COVID-19. And subsequently ensuring a faster economic rebound among developed nations. Crude oil fell back below $60 as arctic storm passes Texas with refinery production is expected to restart this week.
Overnight concerns of a fragile recovery reverberated across Asia rattling investor risk-appetite. Early morning retail sales figures from Australia cemented worries after substantially missing market consensus. Consequently, the S&P200 tumbled as much as 1.5% intra-day. With the $80bn stimulus scheme scheduled to be scrapped in March, Aussie’s will have the rug pulled out from under. Elsewhere, the Japanese Nikkei and Hong Kong’s Hang Seng followed suit, edging lower.
Wall Street nurses another day of losses after an unexpected spike in unemployment claims despite the expectations stimulus checks from the previous administration would buoy a lethargic labour market. Upon release, the Nasdaq again underperformed, declining as low as 1.6% before recovering ground by sessions end following Treasury Secretary Yellen on CNBC defending the need for the $1.9tn pandemic package.
Third day of losses out of Europe. Vaccine hope against the new variant out of South Africa was dented after further trials revealed Pfizer’s jab as significantly less effective. Disappointing headline corporate earnings alongside ECB minutes depicting weary policymakers over the euro’s strength hitting exports further weighted down benchmarks.
Crude oil took a dive from $62 to $59 as the National Weather Association warns extreme weather conditions will not only remain through next week bringing “significant ice accumulations and heavy snowfall” but also extend towards the East Coast from Texas. With refineries shut, U.S. production capacity is now at 60%, equivalent to a loss of 4 million barrels a day.
Weak economic data saw majors gain against the U.S. dollar. Meanwhile gold held its level at $1,772 and profit taking in bitcoin left the cryptocurrency just below $52,000.