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Archinomics Weekly - Monday 8th March 2021

2 months ago

the
MARKETS

Equities

US indices saw mixed fortunes, as a late rally in the S&P500 was not matched by the Nasdaq index of tech heavyweights. European markets ended higher, buoyed by hopes of unlocking, while the UK outperformed on the announcement of further fiscal stimulus. Japan’s Topix index climbed on the weaker yen and a rebound in the manufacturing sector, while China’s main index approached correction territory. Emerging markets saw notable strength among oil exporting economies.

Bonds

US government bond markets were particularly hard hit, while their European counterparts held steady. The Bank of Japan pledged to keep yields on the 10 year government bond around 0%. US credit markets felt the impact of rising yields on longer dated US Treasuries. Emerging market debt spreads widened modestly, standing at 363 basis points over US 10 year Treasuries, while outperforming the Global Aggregate index.

Currencies

The US dollar rose across the board, on expectations of earlier interest rate increases. The yen was weaker across the board after dovish commentary from the Bank of Japan. The euro weakened against all majors except the yen.

Commodities

Oil continued to rally hard, as the OPEC meeting confirmed a willingness to restrain production increases into April. Iron ore hit a 10 year high, reflecting the strength of the rebound in demand.

Responsible investing

Italy’s first green bond of €8.5bn was in hot demand, receiving over €80bn of bids. This is more than double the demand seen for Germany’s debut green bond last autumn, indicating growing interest in this market segment.

MACROECONOMIC
UPDATE

US Federal Reserve chairman Jerome Powell promised a ‘patient’ approach to withdrawing monetary support as the recovery progresses, as well as underlining his vigilance against disorderly bond markets or a persistent tightening in liquidity.


China announced a GDP growth target of 6% for 2021, comfortably within market forecasts which exceed 8%. China will switch to annual growth targets, abandoning the five year average annual target of recent times.


US February ISM data for the services sectors saw a ‘big miss’, coming in at 55.3 against forecasts around 58.7, while nonetheless achieving the ninth straight month of growth.

on the
RADAR

President Biden’s $1.9 trillion American Rescue Plan should be written into law on Tuesday, having received approval from the Senate over the weekend.


US February inflation data will be closely watched for signs of creeping towards the Federal Reserve’s 2% target, with consensus forecasts at 1.7%.

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