Archives of “March 2021” month

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OECD raises 2021 global GDP growth forecast to 5.6% from 4.2% previously

  
Analysis, Economy

OECD presents their latest economic forecasts, outlook

OECD
  • 2021 global GDP forecast +5.6% (previously +4.2%)
  • 2021 US GDP forecast +6.5% (previously +3.2%)
  • 2021 Eurozone GDP forecast +3.9% (previously +3.6%)
  • 2021 UK GDP forecast +5.1% (previously +4.2%)
The organisation also raises its 2022 global GDP growth forecast to 4.0% from 3.7% previously in December. The latest outlook projects a significant boost to the US and global economy, helped by Biden’s $1.9 trillion stimulus package.
The report highlights that Europe risks falling behind in the global upswing with expectation for global output to rebound above pre-pandemic levels by mid-2021.

Eurozone Q4 final GDP -0.7% vs -0.6% q/q second estimate

  
Analysis, Economy

Latest data released by Eurostast – 9 March 2021

  • Q4 GDP -4.9% vs -5.0% y/y second estimate
The second estimate report can be found here. Looking at the details, household consumption fell by 3% q/q after the revised 14.1% q/q jump in Q3 while government expenditure expanded by another 0.4% q/q after the revised 4.6% q/q jump in Q3 last year.
The data doesn’t really do much but reaffirm a potential double-dip recession in the Eurozone as Q1 economic conditions may also present a contraction.
That said, the focus of the market remains more geared towards the 2H 2021 outlook.

Dollar retreats further on the session on lower yields

  
  Analysis

Dollar loses more ground in European trading today

USD/JPY is down to a low of 108.60 from 109.20 earlier in the day while EUR/USD is closing in on 1.1900 once again from around 1.1850 at the start of the session.
USD/JPY D1 09-03
As Treasury yields are keeping lower, the impetus for the greenback to keep the upside momentum is hitting a pause for the moment and turning around slightly.
The dollar is lower across the board but it is quite a distance away from testing key levels to suggest a turnaround in the recent upside momentum.
For USD/JPY, the 100-hour moving average is seen @ 108.04 and that will be the first key near-term level in focus for sellers to test any extensive downside run.
Meanwhile, that same level is seen @ 1.1952 for EUR/USD with the 23.6 retracement level of the swing move lower from 1.2243 to 1.1836 is seen @ 1.1932.
As such, the dollar is giving up some ground but there is yet to be any key turning point – technically speaking. That said, perhaps the market is still not completely certain that the Fed will allow this bond selloff to run further at the FOMC meeting next week.

Copper overshooting fundamentals?

  
  Analysis

Copper

Copper prices have been on a very strong rally in line with other commodities. Futures markets had rallied above $9,000 a ton on the reflationary trade narrative. A global vaccine roll out would bring economies back to normal. However, the recent surge higher in bond yields is causing markets to worry that things are going too quickly.

Copper will come under pressure. On top of the bond yield rise on faster rate rises being anticipated stockpiles in copper are also high. According to Bloomberg the levels of copper sat in China’s bonded warehouses have stayed high since the surge higher from July last year. Stockpiles have also been reported to be picking up in Shanghai, London, and New York since late February. Furthermore, with reports that China are also talking about walking back from easy policy copper looks like it will find sellers on the short term rallies higher.

However, deeper pullbacks should still find buyers as the return to global growth should support prices over the medium to longer term. Citi upgraded their near-term copper point price forecast (0-3 months) to USD 10,500/t (prev USD 9,000/t); and raises their 2021 forecast to USD 10,000/t (USD 9,000/t).

Nikkei 225 closes higher by 0.99% at 29,027.94

  
Analysis, Global Indices

Asian equities rebound on reported China intervention

Nikkei 09-03
The Nikkei fell early on but recovered as broader sentiment in Asia was bolstered by reported intervention by Chinese authorities in propping up the market.
The Hang Seng turned losses into gains of over 1% now while the Shanghai Composite is well off earlier lows but is still seen down a little by 0.5%.
Treasury yields are holding a little lower on the day while US futures are keeping higher. That points to a slightly more positive risk mood ahead of Europe.
Elsewhere, the dollar is keeping steadier as it trades more mixed across the board but USD/JPY is keeping buoyed on a break above 109.00 today.

Fitch expects a more modest fiscal consolidation in China this year

  
Analysis, Economy

Analysts at Fitch rating agency say the Chinese government planned fiscal consolidation in 2021 is more modest than the agency previously expected.

Also:

 

  • China strikes cautious note on fiscal consolidation
  • estimate consolidated fiscal deficit will moderate to 7.5% of GDP this year, from 9% in 2020
  • baseline forecasts suggest Chinese government debt-to-gdp ratio will rise to about 57% by end-2021, up by 10pp from end-2019

 

(The implication of all this is even more stimulus is ahead in China than previously thought)

Goldman Sachs end-2021 UST 10 year forecast is 1.9% on ‘turbocharged growth expectations’

  
  Analysis
GS has ramped its forecast higher from 1.5% to 1.9% citing:
  • persistent aggressive central bank pricing
  • continued repricing higher of intermediate and long-end real yields on turbocharged growth expectations
In that link to the SG projection you’ll note their ‘key risk’ (i.e. the Fed pushing back). Morgan Stanley are looking for this as soon as the March FOMC meeting:
  • Expects Fed push back against current market pricing of rate hikes
  • says the result will be investor fear subsiding about an earlier exit from accommodative policy
MS say this will present a:
  • tactical opportunity to buy the bond market
—
March FOMC is on the 17th, announcement at 1800GMT
  • Fed Chair Powell press conference follows at 1830 GMT
Earlier post here on SG's even higher yield target of 2% by the end of 2021:

Pelosi says passage of Biden’s $1.9tln package could be Wednesday, not Tuesday

  
  Analysis

President Biden’s $1.9 trillion COVID relief bill is expected to be easily approved in the US House of Representatives,

  • The Senate has already approved it.
  • After the House votes to approve it’ll be off to Biden for signing into law.
Just a heads up though, Speaker Pelosi says that approval from the chamber could slip to Wednesday.
Still the best pic of Pelosi ever
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