Treasury yields, dollar roar back; Nasdaq deep in the red
US Treasury yields roared back before the end of the week, with the 10-year yield peaking at an intra-day high of 1.6140% before pulling back below 1.60%. Of course, the dollar could not resist and had to earn its share of gains, pushing dollar/yen back above 109.00.
Consequently, the buying pressure in the greenback brought gold bears back into play, squeezing the precious metal towards $1,700/oz following the rejection near the $1,740/oz resistance area on Thursday.
The US government got the green light to inject another $1.9 trillion stimulus into the economy last week. But investors look at the disadvantages the extra stimulus could have, and this is stronger inflation and subsequently an earlier call for monetary tightening, which would be negative for stocks, especially for those in the tech sector, which are considered overvalued. The Fed’s verbal intervention proved worthless to mute this narrative, and it would be interesting to see if next week’s FOMC policy meeting finds a different way to cease the worrisome pace of the yield rally. Yet, note that ECB’s willingness to raise the pace of PEPP purchases on Thursday was not effective enough to knock the 10-year German bund yield.
US futures returned in negative territory except those of Dow Jones which were neutral. Nasdaq 100 futures suffered the most, holding down by 1.46%.
The strong pickup in the US producer price index (PPI), which advanced by 2.6% y/y, did not deviate much from forecasts, and therefore was almost ignored by markets.
Loonie cheers on upbeat Canadian employment data
On the other hand, February’s employment figures in Canada were something to celebrate as jobs growth accelerated by 259k versus 75k expected, pressing the unemployment rate to 8.2% from 9.2% previously. Dollar/loonie dropped quickly to a two-week low of 1.2509 after the release, while loonie/yen edged up to 87.13, the highest since September 2018.
Eurozone on the back foot
The mood in the eurozone remained bleak and the better-than-expected industrial production data for January was not enough to boost the euro as the troublesome vaccine program, the rampant virus variants, and the rising hospitalizations threatened a third wave of lockdowns at a time when member states are trying to reopen part of their economies.
Every single sector was in the red, pushing European indices towards a negative close. Euro/dollar stabilized its decline around 1.1900 but was down on the day. Pound/dollar was also on the back foot, last seen at 1.3884.
Coming up
Before all eyes turn to the Fed’s policy decision next week, the University of Michigan’s preliminary consumer sentiment index for March could have the latest word on consumption and inflation today at 15:00 GMT.
China has not been making headlines over the past few weeks but could get noticed early on Monday when retail sales, industrial output, and urban investment data come out of the country at 02:00 GMT. The figures are expected to show a double-digit annual growth of more than 30% in February, likely helping the aussie and the kiwi to pare today’s losses if the numbers beat estimates.
Origin: XM
