Weekly Market Wrap 01-March to 05-March 2021

Marius Paun | London, UK | Senior dealer | Friday 05th March 2021

The Non-Farm Payrolls Surprises On The Upside

We had the US non-farm payrolls numbers out on Friday which showed the economy added 379,000 jobs in February with unemployment coming in at 6.2%. The figure was far better than 180,000 expected and exceeded January’s rise of 160,000. The vast majority of job growth, about 355,000, came from the leisure and hospitality sector once restrictions were eased or lifted in certain parts of the country.

Meanwhile, the Fed’s Beige Book indicated the economic activity expanded modestly from January to mid-February. There seems to be a cautious optimism developing as US President Biden said every American could get vaccinated by the end of May. For the stock markets, there was a different story altogether. The rising bond yields fuelling fears of inflation continued to put downside pressure on stocks with Nasdaq now in the red for the year.

China wants to boost research into high tech, CNBC reported, focusing on artificial intelligence, quantum computing, genomics and biotechnology, semiconductors and space. It laid a new five-year plan and premier Li Keqiang said the research and development budget will be increased by 7% until 2025.

European Central Bank did not seem that concerned by the rising bond yields saying that they saw no need to take drastic action. It added that the risk to the economy is manageable via verbal interventions and QE flexibility !!!……….really? Maybe because the eurozone February CPI came in at 0.9% in line with expectations.

Back in the UK the Chancellor of the Exchequer, Rishi Sunak, announced the Budget dubbed the Recovery Budget. He will extend the furlough scheme for UK workers to the end of September, with employers contributing 10% of furlough costs in July and 20% in August & September.

Chancellor Sunak also added something new, an incentive to pull forward companies spending plans. By encouraging firms to spend some extra on investment he offered a ‘super deduction’, a 130% tax relief for qualifying plant and machinery. Due to those extra incentives, the Office for Budget Responsibility said the GDP will increase by over 7% in 2022!

No sign of stopping for the US Oil prices which reached above $66.00 this week, a level last seen in April 2019. The driver was OPEC+ agreeing to keep oil output unchanged in April, although Russia made the case for increasing supply. Gold prices were hurt by the same rising yields despite fears of inflation and dropped below $1700 to a low of $1687 on Friday afternoon.

Bitcoin dropped below $47,000 after failing to move back above $53,000 as Fed Chair Powell shrugged off concerns over increasing rates. It seems even the crypto currencies were affected by the rising yields scare.