Market Commentary - April 29, 2021
Federal Reserve sets a high bar before even considering pulling back quantitative easing after clarifying “substantial further progress” needs to be made towards full employments and inflation foremost. Whilst inflation expectation rose substantially in Q1, the central bank considers the increase as ‘largely transitory’. Despite reassurances by Chairman Jerome Powell, all in large, Wall Street only managed etch out minute gains. Cautious of the undertone a U.S. economic recovery has found solid footing amid a 2.25tn infrastructure plan on top of a 1.9tn pandemic relief plan followed by a proposed 1.8tn education and childcare plan unveiled just yesterday.
In Asia, Hang Seng opened higher amid Hong Kong’s parliament passing a tax concession bill for funds that would bolster competitiveness in financial markets. The tax concession would apply to carried interest distributed by private equity funds as well as remuneration paid in such firms. Despite Japanese markets closing in observance of Showa Day, futures rose by 0.35% intraday whilst the S&P200 was flat on lacklustre earnings releases. Elsewhere overnight European markets was mixed but ended largely in positive territory as investors weigh against the Fed’s current stance with a revised economic outlook.
The U.S. dollar lost ground against a mix of majors following the Federal Reserve’s reiteration of loose monetary policy. Crude oil crept higher to $63.60 as weekly inventories lowered, gold fluctuated between $1,763 – $1,783 and bitcoin halts its two-day advance to retreat to just above $54,000.
Figure 1 (Source: IS Prime) USDCNH Daily : The yuan set to post 4 consecutive weeks of advances as China's post-pandemic recovery slingshots ahead of America despite President Biden's continual fiscal splurge.
- Retail sales figures from Canada came in better than expected with both core sales and normal sales posting a 4.8% growth month. The increase was attributed to demand in motor-vehicle, parts dealers and petrol stations.
- Crude oil inventories decline from 0.6M to 0.1M giving weigh to OPEC’s claim that despite India’s COVID-19 predicament, global demand remains relatively strong.
- The Federal Reserve will hold its policy rate near zero and maintain its 120bn monthly asset purchases as expected. Whilst the central bank upgraded their economic assessment of the U.S, the recent surge in inflation expectation is consider temporary.
- President Biden unveil this third trillion-dollar stimulus package worth 1.8tn. The package plans to support education and childcare via direct expenditure as well as tax credits.
Headliner to Watch
- Quarterly growth in the U.S. is expected to gain pace increasing to 6.8% from 4.3% whilst unemployment claims to edge lower from 547k to 545k.
- China’s manufacturing PMI set to jump from 51.9 to 55.9.
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Topics: Market Commentary