The Weekly Wrap – Rising Yields and A Dollar Resurgence Was the Story of the Week

The Stats

It was a busier week on the economic calendar, in the week ending 5^th March.

A total of 70 stats were monitored, following 52 stats from the week prior.

Of the 70 stats, 40 came in ahead forecasts, with 25 economic indicators coming up short of forecasts. There were 5 stats that were in line with forecasts in the week.

Looking at the numbers, 37 of the stats reflected an upward trend from previous figures. Of the remaining 33 stats, 28 reflected a deterioration from previous.

For the Greenback, it was a 2^nd consecutive week in the green, in the week ending 5^th March. The Dollar Spot Index rallied by 1.22% to end the week at 91.985. In the previous week, the Dollar had risen by 0.57% to 90.879.

FED Chair Powell’s speech from Thursday delivered 91 levels for the Dollar.

Out of the U.S

It was another relatively busy week on the economic data front.

In the first half of the week, private sector PMI figures were in focus along with ADP nonfarm employment numbers.

It was a mixed set of stats for the markets.

While manufacturing sector activity picked up in February, service sector growth hit a speed bump.

In February, the ISM Manufacturing PMI rose from 52.6 to 54.4. The Non-Manufacturing PMI, however, fell from 58.7 to 55.3.

The ADP numbers were not much better. In February, nonfarm employment rose by 117k in February, according to the ADP. Economists had forecast a 177k rise.

On Thursday, the market attention shifted to the weekly jobless claims figures ahead of the government labor market numbers on Friday.

In the week ending 26^th February, initial jobless claims increased from 736k to 745k.

At the end of the week, nonfarm payrolls impressed, however, with a 379K jump in February. The better-than-expected rise took the unemployment rate down from 6.3% to 6.2%.

In January, nonfarm payrolls had risen by a more modest 166k.

On the monetary policy front, FED Chair Powell fueled a Dollar rally overnight on Thursday. Powell failed to address the issue of rising yields, which suggested a willingness to allow yields to rise further.

In the equity markets, the NASDAQ fell by 2.06%, while the Dow and S&P500 rose by 1.82% and by 0.81% respectively.

Out of the UK

It was another relatively quiet week on the economic data front.

Finalized private sector PMI figures for February were in focus along with the Tories annual budget release.

It was a mixed set of numbers for the Pound.

An upward revision to the manufacturing PMI was offset by a downward revision to the services PMI.

Late in the week, construction PMI figures for February had a muted impact on the Pound.

In February, the construction sector joined the manufacturing sector in expansion, with the PMI rising from 49.2 to 53.3.

From the UK government, the annual budget failed to move the dial.

In the week, the Pound fell by 0.66% to end the week at $1.3841. In the week prior, the Pound had fallen by 0.59% to $1.3933.

The FTSE100 ended the week up by 2.27%, reversing a 2.12% slide from the previous week.

Out of the Eurozone

It was a particularly busy week on the economic data front, with private sector PMI figures in focus.

While the manufacturing sector continued to deliver, service sector woes left the Eurozone Composite at 48.8 in February. A continued contraction highlighted some uncertainty towards the economic recovery.

Other stats included German and Eurozone inflation, retail sales and unemployment figures.

The stats were skewed to the negative, however, with a retail sales slump in January worse than expected.

At the end of the week, the German economy was back in focus. Factory orders rose by a larger than anticipated 1.4% and were up by 3.7% when compared with Feb-2020.

For the week, the EUR slid by 1.33% to $1.1915. In the week prior, the EUR had fallen by 0.36% to $1.2075.

For the European major indexes, it was bullish week. The CAC40 rose by 1.39%, with the DAX30 and EuroStoxx600 gaining 0.97% and 0.88% respectively. A bearish end to the week left the majors with relatively modest gains.

For the Loonie

It was a busy week.

4^th quarter GDP figures were in focus in the 1^st half of the week.

The figures revealed a slowdown in growth from the 3^rd quarter, aligned with economies elsewhere.

Quarter-on-quarter, the economy grew by 2.3%, while contacting by 3.23% year-on-year.

In December, the economy expanded by a modest 0.1%, slowing from 0.8% growth in November.

At the end of the week, the focus shifted to January trade data and February’s Ivey PMI

In January, the trade balance jumped from a C$1.98bn deficit to a C$1.41bn surplus. A more marked increase in exports led to the return to a trade surplus mid-way through the quarter.

For February, the Ivey PMI was also Loonie positive, jumping from 48.4 to 60.0. While an impressive figure, the market impact was limited as a result of market concerns over yields.

In the week ending 5^th March, the Loonie fell by 0.62% to C$1.2659. In the week prior, the Loonie had fallen by 0.57% to C$1.2738.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 5^th March, the Aussie Dollar fell by 0.26% to $0.7686, with the Kiwi Dollar ending the week down by 0.91% to $0.7167.

For the Aussie Dollar

It was a busy week.

Early in the week, manufacturing and company gross operating profit figures were in focus.

It was a mixed bag, with manufacturing sector activity improving in February.

4^th quarter profits were dire, however, sliding by 6.6% in the 4^th quarter. In the 3^rd quarter, company gross operating profits had risen by 3.2%.

In the 2^nd half of the week, GDP, retail sales, and trade data were in focus.

The stats were skewed to the positive. The economy contracted by less than had been anticipated, with the trade surplus widening off the back of a marked pickup in exports.

Retail sales figures came up short of prelim numbers but still recovered from December’s 4.1% slide.

On the monetary policy front, the RBA was also in action but stood pat following the previous month’s surprise move.

For the Kiwi Dollar

It was a particularly quiet week.

Economic data was limited to building consent figures that had a muted impact on the Kiwi Dollar

For the Japanese Yen

It was a relatively busy week.

Finalized private sector PMIs for February and 4^th quarter capital spending figures were in focus.

The stats were skewed to the positive in the week, though not enough to prevent a Yen slide to ¥108 levels.

In February, the manufacturing sector returned to expansion, with the PMI rising from 49.8 to 51.4.

The services sector continued to contract, however, with the PMI rising from 46.1 to 46.3.

Capital expenditure saw further decline in the 4^th quarter, though to a lesser extent than in the previous quarter. Year-on-year, capital expenditure was down by 4.8%. In the 3^rd quarter, CAPEX had been down by 10.6%.

The Japanese Yen slid by 1.63% to ¥108.31 against the U.S Dollar. In the week prior, the Yen had fallen by 1.06% to ¥106.57.

Out of China

It was a busier week on the data front, with private sector PMI figures for February in focus.

The stats were skewed to the negative, with growth across the private sector slowing moderately mid-way through the quarter.

In February, the market’s favored Caixin manufacturing PMI fell from 51.5 to 50.9, with the services PMI falling from 52.0 to 51.5.

As a result, the composite PMI slipped from 52.2 to 51.7.

Common themes across the PMI numbers from China and beyond were rising prices but also marked increases in optimism.

In the week ending 5^th March, the Chinese Yuan fell by 0.36% to CNY6.4970. In the week prior, the Yuan had fallen by 0.25% to CNY6.4737.

The CSI300 fell by 1.39%, while the Hang Seng rose by 0.41%.