Market Update 09/03/2021: No Rush To Rise

Markets and key events

Oil Prices jumps on OPEC by 4 percent - KM CapitalWith the chair of the US Federal Reserve (Fed), Jay Powell, yet again confirming that the Fed will be in no hurry to raise rates, Inflationary fears remained centre of attention last week10-year US Treasury yields, which move inversely to prices, went as high as 1.58%, having started the year at 0.91%.  Highly valued stocks,  usually less sensitive to the economic cycles, sold off, with US technology stocks falling 3.6% during the course of the week.  Global energy stocks moved in the opposite direction gaining 5.4%, supported by a further rally in crude oil prices.

As of 12pm London time on Friday, global equities fell 0.6% over the week, whilst US equities, with a high exposure to large cap technology companies, fell 1.1%.  European equities, with a greater weight in economically sensitive companies, rose 1.6%, with UK equities rising 2.8%.  Japanese stocks rose 1.7% and the Australian market gained 0.6%.  Emerging Markets were up 0.5%, with Latin America, having a higher exposure to commodities, rising 2.5%.

As bond yields rose in the US, the opposite happened in Europe with the yield on 10-year German bunds falling to -0.30, and UK gilts 0.77%.

Gold dropped in value almost 2%, now trading at $1,695 an ounce.  The price of copper also fell by 1.1% to $405, having rallied from just over $200 in March of 2020.  Brent crude gained a further 3.7%, now trading at $68.6 a barrel, whilst US WTI (West Texas Intermediate) rose 6.4%, taking it to $65.5 a barrel after OPEC (Organisation of the Petroleum Countries) offered no further supply despite the substantial rise in price over the past year.

The US Jobs Challenge and Its FutureThe US economy added 379,000 jobs in February, breaking a two-month period of minimal gains. The unemployment rate reduced marginally to 6.2%. As social distancing measures were eased, and the vaccination programme gained steam hiring was strong in the leisure and transport sectors.

The Federal Reserve chairman Jerome Powell said he expects hiring to pick up in the coming months, but felt it was unlikely that the US would return to its pre-pandemic employments levels this year. Turning to inflation, he believes that economic reopening could “create some upward pressure on prices” but said that the central bank would be patient in its response.

The American Senate began the debate on Joe Biden’s $1.9 trillion stimulus bill after it passed the House of Representatives. The President will need the support of all 50 Democratic senators if it is to succeed. One obstacle could be the proposal to raise the minimum wage to $15 an hour, which some have argued should be introduced under separate legislation.

In Britain, the government’s budget provided yet more spending on workers and businesses to cushion the blow of the pandemic. The furlough scheme, which pays staff wages and has been in place for a year, was extended to September. Fiscal support for the pandemic is now over $500 billion, part of which the government will look to recoup through a rise in corporation tax from 19% to 25% in 2023. Before that there will be a two-year tax break for companies intended to spur investment. 

UK grapples with phasing out job furlough scheme | Financial Times
India’s economy pulled out of recession
 in the last three months of 2020, as GDP expanded by 0.4%. A large stimulus package in Brazil helped the country to limit its fall in GDP last year to 4.1%.

At the National People’s Congress in China, Premier Li Keqiang, announced that the country is targeting economic growth of over 6% this year. Mr Li also set a goal of creating 11 million new urban jobs this year, up from 9 million in 2020.

Covid-related restrictions brought about a 6% drop in energy-related carbon-dioxide emissions last year, according to the International Energy Agency. America’s emissions fell by 10% whilst China’s rose by 0.8%. Globally, the decline in road activity accounted for 50% of the fall in demand for oil and the slump in aviation for 35%.

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