DAILY MARKET REPORT

19.03.2021

Index Last Change DJIA 32,862.30 153.07 S&P 500 3,915.46 58.66 13116.17 409.03 NIKKEI 29,792.05 424.70 HANG SENG 28,761.16 644.56 DJ EURSTOXX 50 3,867.54 17.80 FTSE 100 6,779.68 17.01 CAC 40 6,062.79 7.97 DAXX 14,775.52 178.91

 US

Nasdaq tumbles 3% as soaring yields hit tech shares, S&P 500 closes 1.5% lower

Technology shares led the U.S. stock market lower on Thursday as a spike in bond yields fueled concern about equity valuations and prompted investors to sell growth-focused high flyers.

The Nasdaq Composite dropped 3% to 13,116.17 for its worst day since Feb. 25 as Apple, Amazon and Netflix all fell more than 3%. Tesla slipped nearly 7%. The S&P 500 slid 1.5% to 3,915.46, falling from a record closing high reached in the previous session. The Dow Jones Industrial Average fell 153.07 points, or 0.5%, to 32,862.30 after hitting a new intraday record earlier in the day amid a rally in bank stocks.

The 10-year Treasury yield jumped 11 basis points above 1.75% at its session high, reaching its highest level since January 2020. The 30-year rate also climbed 6 basis

points at one point, breaching the 2.5% level for the first time since August 2019. The jump in bond yields came after the Federal Reserve expressed its willingness to allow an overshoot in inflation. Rising rates can have an outsized impact on growth stocks as they make their future returns less valuable today.

“Risk of rates rising too fast remains a key concern,” said Craig Johnson, technical market strategist at Piper Sandler. “Buying pressure has not been equal over the last several weeks as growth stocks lag behind due to headwinds from higher interest rates.”

Bank stocks outperformed as higher interest rates tend to improve their profit margins. Banks can earn more from the widening gap between the rate they borrow at in the short term and the rate they lend out at in the long term. U.S. Bancorp and Wells Fargo popped 3.3% and 2.4%, respectively. JPMorgan jumped 1.7%, while Bank of America gained 2.6%.

Investors also digested a mixed bag of economic data Thursday. Weekly initial jobless claims totaled 770,000 for the week ended March 13, worse than an estimate of 700,000, according to economists polled by Dow Jones.

Meanwhile, the Philadelphia Federal Reserve’s manufacturing showed a reading of 51.8, well exceeding Dow Jones consensus of 22.0 and hitting the highest level for the gauge since 1973.

The energy sector was the biggest loser with a 4.7% decline Thursday amid a drop in oil prices. WTI crude futures slid more than 7% to $60 per barrel, falling for a fifth straight day and suffering its worst day since September.

The blue-chip Dow closed above 33,000 for the first time on Wednesday after the Fed said it does not expect to hike interest rates through 2023.

Fed Chair Jerome Powell reiterated that the central bank wants to see inflation consistently above its 2% target and material improvement in the U.S. labor market before considering changes to rates or its monthly bond purchases.

“By saying that they’re willing to let inflation run hot at a time inflation concerns are rising is another way for the Fed to say that they are willing to let long-term interest rates rise further,” said Matt Maley, chief market strategist at Miller Tabak.

The Fed upgraded its economic outlook, expecting to see gross domestic product grow 6.5% in 2021 and inflation rise 2.2% this year as measured by personal consumption expenditures. The central bank’s stated goal is to keep inflation at 2% over the long run.

 EUROPE & UK

European stocks set to retreat as bond yield spike spooks global markets

 Technology stocks took the brunt of the pain stateside on Thursday, as the benchmark U.S.10-year Treasury yield jumped 11 basis points to break above 1.75% for the first time since January 2020.  Germany and France are among the countries resuming the rollout of the AstraZeneca/University of Oxford Covid-19 vaccine Friday, after British and European medicines regulators recommended it continue to be used.

LONDON — European markets are heading for a lower open Friday after a spike in bond yields reignited concerns about stock valuations and prompted a sell-off on Wall Street.

Britain’s FTSE 100 is seen around 59 points lower at 6,721, Germany’s DAX is set to fall by around 92 points to 14,684 and France’s CAC 40 is expected to drop around 48 points to 6,015, according to IG data.

European stocks are set to receive a weak handover from Asia-Pacific, where shares mostly declined during Friday’s trade following the overnight sell-off stateside.

Following its latest monetary policy meeting, the Bank of Japan announced a raft of measures that included widening the range at which the 10-year Japanese

government bond yield is allowed to fluctuate from the target level to between plus and minus 0.25%.

The Bank of England kept interest rates and its bond buying program unchanged on Thursday, following the lead of the U.S. Federal Reserve with a cautious tone on the prospects for future rate hikes.

Technology stocks took the brunt of the pain stateside on Thursday, as the benchmark U.S.10-year Treasury yield jumped 11 basis points to break above 1.75% for the first time since January 2020. The Nasdaq Composite shed 3% to lodge its worst day since Feb. 25.

Futures tied to the major U.S. indexes were mixed in the early hours of Friday, as the 10-year yield mellowed to just above 1.69%.

Oil prices are also in focus after a slump on Friday, as reports of new waves of coronavirus infections and further lockdown measures in Europe dampened the outlook for crude demand.

Germany and France are among the countries resuming the rollout of the AstraZeneca/University of Oxford Covid-19 vaccine Friday, after British and European medicines regulators recommended it continue to be used following concerns over a small number of recipients developing blood clots.

On the data front, British consumer sentiment notched a one-year high in March, according to a GfK survey, with hopes for an imminent economic recovery growing, as the country seeks to emerge from nationwide lockdown measures in the coming months.

 ASIA

Asia-Pacific markets mostly decline as investors turn cautious

 Asia-Pacific markets fell Friday as investor sentiment turned cautious, following an overnight selloff stateside.  In the currency market, the dollar erased most of its losses seen after the Fed decision on Wednesday.  Overnight, oil prices collapsed on the back of demand recovery expectations and a relatively stronger U.S. dollar.

SINGAPORE — Asia-Pacific markets mostly fell Friday as investor sentiment turned cautious, following an overnight selloff stateside.

Australian shares traded lower, with the benchmark ASX 200 closed down 0.56% at 6,708.20 — the index retraced some of its earlier losses of more than 1%. The energy and materials sectors declined 2.03% and 1.41%, respectively, while the heavily-weighted financials subindex finished down 0.31%.

The in Japan declined 1.29% while the Topix index reversed losses to trade up 0.12%.

Japan’s central bank concluded its two-day monetary policy meeting. It announced a raft of measures that included a decision to widen the range at which the 10-year Japanese government bond yield is allowed to fluctuate from the target level to between plus and minus 0.25%.

South Korea’s Kospi fell 0.68% while the Kosdaq turned around losses to gain 0.24%. Tech names sold off as shares of Samsung Electronics fell 0.84%, SK Hynix declined 2.11% and LG Electronics lost 1.93%.

In Hong Kong, the fell 1.82% while Taiwan’s Taiex was down 1.16%.

Chinese mainland shares also declined: The Shanghai composite was down 1.78% and the Shenzhen component lost more than 2.6%.

The stock market on Wall Street struggled overnight, where tech shares were hit hard while the Dow and S&P 500 also declined. That weakness in shares was mirrored by an uptick in bond yields.

Yields move in the opposite direction to prices. Rising bond yields typically signal confidence about economic recovery and fears about inflation, which can make high growth stocks appear less attractive to investors.

“It was a mixed session for risk assets overnight as bond yields pushed higher in the aftermath of the FOMC meeting,” analysts at ANZ Research wrote in a Friday morning note. “The Fed will wait for evidence of stronger data before raising their fed funds forecasts. This saw market measures of inflation expectations rise, sending bond yields up.

Currencies and oil In the currency market, the dollar traded near flat at 91.857 against a basket of its peers. Overnight, the greenback erased most of its losses seen after the Fed decision on Wednesday.

“The Federal Reserve has no plans to raise interest rates until 2023 but the recovery in the dollar and rise in Treasury yields tell us that investors continue to be drawn to the economy’s positive outlook,” Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management said in a Thursday note.

Lien explained that the Fed will not be able to keep the U.S. dollar down “because vaccine rollout and stimulus checks will make for strong second quarter and second half recovery.”

The Japanese yen changed hands at 108.9 per dollar, strengthening from an earlier level around 109.12. The Australian dollar slipped 0.14% to $0.7745.

Oil prices see-sawed between gains and losses on Friday during Asian trading hours, following a sharp drop in the previous session.

U.S. crude gave up gains to trade down 0.28% at $59.83 a barrel while global benchmark Brent retraced gains to trade down 0.28% at $63.10.

Overnight, prices tumbled close to 7% or more for both U.S. crude futures and Brent.

“Crude oil prices collapsed as concerns over weaker demand in the short term deepened,” the ANZ analysts wrote. “Following recent updates from IEA, EIA and OPEC, growth in oil demand looks likely to remain well below previously optimistic forecasts. This comes amid mixed economic data.”

The stronger U.S. dollar also likely weighed on investor appetite in the sector.

Economic Release

 Europe and UK

Event Survey Prior EUR : GERMAN PPI 2.% 0.9%

 US and Canada

Event Survey Prior

US: CFTC POSITIONS - 51.4K

DOMESTIC MARKET

Stocks Last Close Change Volume

SOLIDERE A 25.07 24.82 0.25 59319 SOLIDERE B 24.8 23.81 0.99 14563 HOLCIM 14 14 0.00 2000 BLOM GDR #N/A N/A #N/A N/A #N/A N/A 0 BLOM BANK 3 3 0.00 0 AUDI GDR #N/A N/A #N/A N/A #N/A N/A 0

FOREIGN EXCHANGE

Currencies BID ASK EUR/USD 1.193 1.195 GBP/USD 1.395 1.3960 USD/JPY 108.75 109.0 USD/CAD 1.2450 1.2475 USD/LBP 1510 1520 USD/CHF 0.926 0.9275

Commodities Spot Closing GOLD 1742.9 1736.42 SILVER 26.166 26.0718 CRUDE OIL 59.39 60

Market Summary

Commodities

Oil steadies but Europe pandemic outlook knocks demand hopes

 Oil prices edged up on Friday, but were still down more than 8% for the week as a new wave of COVID-19 infections across Europe spurred fresh lockdowns.  That dampened hopes that an anticipated recovery in fuel demand would come soon.  U.S. crude was up 10 cents, or 0.2%, at $60.10 a barrel by 0233 GMT while global benchmark Brent crude was up 18 cents, or 0.3%, at $63.46 a barrel.

Oil prices edged up on Friday, but were still down more than 8% for the week as a new wave of COVID-19 infections across Europe spurred fresh lockdowns and dampened hopes that an anticipated recovery in fuel demand would come soon.

Prices plunged 7% on Thursday, falling for a fifth day in a row amid concerns about slowing vaccination programs in Europe, even if infections have plummeted in the United States, the worst-hit country and biggest crude consumer.

U.S. crude was up 10 cents, or 0.2%, at $60.10 a barrel by 0233 GMT.

Brent crude was up 18 cents, or 0.3%, at $63.46 a barrel.

“The market is becoming increasingly nervous around some countries in Europe imposing COVID-19-related restrictions once again and, in doing so, raising concerns for the demand outlook,” ING Economics said in a note to clients.

Several large European countries have reimposed lockdowns as new infections increase, while vaccination programs have slowed because of concerns about side effects of the AstraZeneca vaccine, which was being widely distributed in Europe.

Germany, France and other countries have since announced the resumption of inoculations after regulators declared the AstraZeneca vaccine safe, but the program

halt has made it harder to overcome resistance to vaccines among some of the population.

Rising COVID-19 cases, particularly in Brazil, also weighed on the demand outlook, and a stronger U.S. dollar pressured oil prices.

Supplies of oil are plentiful as well, with Saudi Arabia’s crude exports increasing in January for a seventh straight month to the highest since April 2020, according to the Joint Organisations Data Initiative website on Thursday.

Shipments from the world’s biggest oil exporter increased to 6.582 million barrels per day in January from 6.495 million the previous month.

In the U.S., crude inventories increased for a fifth week last week, according to official figures released on Wednesday.

Gold

Gold extends losses as U.S. bond yields firm, dollar rebounds

 Gold prices fell on Friday, pressured by a surge in U.S. Treasury yields and a rebound in the dollar.  But, the metal’s jump to a two-week high in the previous session set it on track to record a small weekly gain.  Spot gold fell 0.5% to $1,728.63 per ounce by 0121 GMT, after hitting its highest since March 1 in the previous session

Gold prices fell on Friday, pressured by a surge in U.S. Treasury yields and a rebound in the dollar, but the metal’s jump to a two-week high in the previous session set it on track to record a small weekly gain.

Fundamentals Spot gold fell 0.5% to $1,728.63 per ounce by 0121 GMT, after hitting its highest since March 1 in the previous session. U.S. gold futures were down 0.3% at $1,728.00 per ounce.

The yield on the U.S. 10-year Treasury note on Thursday rose above 1.75% for the first time in 14 months after the Federal Reserve pledged to look past inflation and keep interest rates near 0% until at least 2024.

Higher yields lift the opportunity cost of holding non-yielding bullion.

The dollar also climbed, making gold expensive for non-holders of the U.S. currency.

The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, but the labor market is regaining its footing as an acceleration in the pace of vaccinations leads to more businesses reopening.

The Bank of England said Britain’s economic recovery was gathering pace but policymakers were split over the prospects for longer-term improvement, dampening speculation about a reversal of stimulus.

The European Central Bank may need some time before the recently agreed acceleration in the pace of money printing, ECB President Christine Lagarde said on Thursday.

Switzerland in February sent gold to mainland China for the first time since September and shipments to India and Thailand rose to multi-year highs.

Palladium was little changed at $2,682.68, having risen over 7.3% to its highest since Feb. 28, 2020 on Thursday.

Supply concerns emerged after the biggest producer of the metal, Russia’s Nornickel Nickel, cut output estimates.

Silver fell 0.6% to $25.89 and platinum was down 0.7% at $1,198.19.

FX

Dollar stronger following higher U.S. yields on Fed’s lower-for-longer stance

 The dollar index was slightly higher following a 0.5% jump from Thursday that was the most in two weeks.  The yen dipped briefly after the Bank of Japan widened its target band for the benchmark yield in a decision that was in line with market expectations.  The euro was slightly weaker at $1.1915, extending Thursday’s 0.5% tumble.

The safe-haven U.S. dollar held firmer on Friday, supported by higher Treasury yields and falling stock markets, as investors digested the Federal Reserve’s pushback against expectations of any early interest-rate hikes.

The dollar index was slightly higher following a 0.5% jump from Thursday that was the most in two weeks.

The benchmark U.S. 10-year yield climbed to a more than one-year peak of 1.754% overnight before easing to 1.706%, while Asian stocks followed Wall Street lower.

The yen dipped briefly after the Bank of Japan widened its target band for the benchmark yield in a decision that was in line with market expectations.

The Federal Open Market Committee (FOMC) pledged this week to press on with aggressive monetary stimulus, saying a near-term spike in inflation would prove temporary amid their projections for the strongest U.S economic growth in nearly 40 years.

“After some navel gazing,” bond investors “concluded that the Fed is not (posing) any challenges or discomfort for longer-dated UST yields to keep pushing higher,” National Australia Bank’s senior FX strategist Rodrigo Catril wrote in a client note.

“The USD regained its mojo.”

The greenback was flat at 108.895 yen, adding to small gains overnight.

Following the BOJ’s decision to widen the target band for the 10-year Japanese government bond yield to 25 basis points around 0% from 20 basis points previously, the yen briefly weakened past 109 per dollar, before retracing all of that move.

“There’s no reason for dollar-yen to react to the latest results of the BOJ assessment because it’s almost in line with what the media reported in advance,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

“For dollar-yen, U.S. Treasury yield change is a much more important driver than the JGB yield change.”

The euro was slightly weaker at $1.1915, extending Thursday’s 0.5% tumble.

While AstraZeneca vaccinations are poised to restart in Germany, France and other European nations, the region’s growth outlook was dinged as Paris went into a month-long lockdown.

The British pound sank 0.1% to $1.3913 after weakening 0.3% a day earlier, as the Bank of England warned the outlook for Britain’s recovery remained unclear, dampening some speculation the bank would signal a more confident outlook.

In the cryptocurrency market, bitcoin stood at around $57,800, as it seesawed after briefly topping $60,000 again overnight.

It had surged to a fresh record high of $61,781.83 on Saturday, after more than doubling since the start of the year.

“Bitcoin is a momentum trade and it feels like it could go a lot further,” said Edward Moya, a New York-based senior market analyst at online FX broker OANDA.

“Is it a bubble? Yes. But it can easily go to $100,000 before it comes crashing down.”

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