The Market Week – Quarter End and beyond
The Market Week – Quarter End and beyond
The focus of attention once again this week is on the Bond market, as the US 10-year treasury yield spiked to 1.76% and the USD continued its significant moves into Quarter end. The enormous $1.9 trillion fiscal stimulus bill could be followed by a blow-out $2.25 trillion Infrastructure Bill; President Biden will outline the details, starting today.
This week sentiment was spooked as a huge Margin Call on Bill Hwang’s Archegos Capital caused potential losses of $6 bn for the investment banking sector with Nomura and Credit Suisse most exposed. Archegos had reported assets of $10 bn but highly leveraged positions of around $50 bn when the selling began last week.
Unemployment remains stubbornly high globally but this week signs of a turnaround may be on the cards. Last week’s unemployment claims beat expectations at 684,000, and the pandemic low of 712,000 from November. This month’s key Non-Farm payroll consensus is 650,000 new jobs for March with a huge range in estimates from 115,000 to 1.1 million.
The vaccine rollouts continue to gain traction globally, however, the situation in the EU, with rising infections, extended lockdowns in much of the continent and a low vaccination rate, coupled with the persistent concerns over the AstraZeneca vaccine, weigh on the EUR.
This week FX volatility picked up as the USD moved higher into month and quarter end. The USDIndex rallied to new five-month highs at 93.45. EURUSD continued to weaken and remained under 1.1800 to post five-month lows at 1.1704. USDJPY clocked a one-year high 4 cents shy of 111.00 as the Japanese financial year ended. Cable moved up from under 1.3700 to peak at 1.3845 before settling in the high 1.3700s.
Global stock markets turned more volatile, amid the Archegos fire sale and as the rotation from high growth technology stocks to financials, energies and industrials continued. The USA30 & USA500 posted new all-time highs. High valuations and an expected rise in inflation could weigh on further gains.
The Gold price moved lower again this week to once again test and break the key $1685 level and remains biased lower with the stronger USD and higher yields while Bitcoin also had another volatile week but has breached immediate resistance at $58,000 and eyes a new all-time high over $60,000.
USOil prices recovered from last week’s $57.25 low as the Ever Given was finally refloated and ahead of this week’s OPEC+ meeting with talk of Russia happy to maintain production caps during April and even May. $60.00 a barrel remains key.
The yield on the US 10-Year Treasury Note now holds well above the psychological 1.500 level, as it tested above 1.7500 to new 14-month highs this week at 1.7600. The potential $1.9tn fiscal and $2.25tn infrastructure stimulus packages, the rapid uptake of the vaccines and opening of the economy added to the spectre of rising inflation are combining to keep yields the main focus of the markets.
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Head Market Analyst
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