Weekly Market Wrap 08-March to 12-March 2021

Marius Paun | London, UK | Senior dealer | Friday 12th March 2021

US Congress Passes The $1.9 Trillion Covid Relief Package

The US President Joe Biden signed the $1.9 trillion coronavirus stimulus package on Thursday with the checks starting to hit bank accounts as soon as this weekend. According to the plan, direct payments of up to $1,400 will be made, a $300 per week unemployment insurance will be extended as well as child tax credits. The bill was passed by the Democrats on their own as Republicans questioned the need while the economy improves.

Meanwhile, the stock rotation out of high tech and into value continued as ongoing concerns of rising interest rates kept investors edgy. At some point, NASDAQ gave back all the gains for the year although it posted a rebound since Tuesday.

The Wall Street Journal reported the US and China officials will meet next week in Alaska. It will be the first meeting between the two countries since President Biden took office.  China’s state planner said the basis for economic recovery is still frail but there is the confidence that China will meet its 2021 targets. It was also promised that liquidity will be kept ‘ample in 2021 given the nominal GDP growth is expected to be high’.

European Central Bank left its key benchmark interest rate unchanged during its monetary policy meeting, as widely expected. The central bank reaffirmed the size of its PEPP at 1.85 trillion euros but said the purchase will be faster during the next quarter. It acknowledged market rates pose a risk to wider financing conditions but sees inflation picking up mostly due to ‘transitory factors. GDP is anticipated to contract again in Q1. Although the risks are now more balanced, the downside risks have increased for the very near term.

Back in the UK, Bank of England Governor Bailey said ‘negative rates contingency planning implies nothing about our intentions in that direction’… well, what are they saying then? He added, the risks remain tilted to the downside but declining and that QE is set to run its course throughout the whole year.

The US Oil prices have started the week strongly following a series of attacks on Saudi facilities over last weekend. Saudi Arabia ports and other oil facilities have been targeted by drones and missiles strikes but the country said the damage is minimal. Oil prices have dropped from a high of $67.85 to $65.5 going into the weekend.

Gold prices made a new recent low at $1676.8 as the yields rise kept the precious metal under pressure. The price rebounded slightly, to trade at $1722 on Friday but trading could remain choppy for the immediate future. Bitcoin on the other hand has recouped the recent losses, crossing back above the $57,000 mark and could retest all-time highs sooner rather than later.