Weekly Recap: 1-5 March

The US economy continues on its path to recovery with strong PMI indicators and a healthy non-farm payrolls report with the US dollar showing strength supported by higher US Treasury yields. The yield on US 10-year Treasury notes rose 1.543%, indicating the highest levels since February or the highest level in more than a year.

The Senate finally approved a $1.9 trillion coronavirus relief stimulus on Saturday, bringing Congress one step closer to fulfilling the election promise of President Biden and Democrats in the United States, the goal being a quick recovery of the worst economic crisis to hit the country since the Great Depression. Senate Democrats fought a 25-hour marathon debate

The bill authorizes $1,400 checks to millions of low- and middle-income Americans, bolsters families by providing new yearly child tax benefits, unemployment boosts for workers still out of a job.

Oil

Oil prices jumped about 3%, reaching their highest level in more than a year, after a stronger-than-expected US jobs report and OPEC and its allies’ decision not to increase supplies in April.

Brent crude futures increased $2.62, equivalent to 3.9%, to bring the settlement price to $69.39 a barrel.

The session high for global benchmark crude was the highest on record since January 2020.

US West Texas Intermediate crude rose $2.26, or 3.5%, to settle at $66.09 a barrel.

On a weekly basis, Brent rose 5.2%, continuing to increase for the seventh week in a row, for the first time since December, while West Texas Intermediate gained 7.4%, after rising 4% last week.

The two benchmarks rose more than 4% on Thursday after the Organization of the Petroleum Exporting Countries (OPEC) and allies, a group known as OPEC+, extended oil production cuts to April and made limited exceptions to Russia and Kazakhstan.

Investors were surprised that Saudi Arabia decided to maintain its voluntary reduction of one million barrels per day during April, even after oil prices rose over the past two months, with the support of immunization campaigns against Covid-19 around the world.

Goldman Sachs raised its forecast for Brent price by five dollars to $75 a barrel in Q2 and $80 a barrel in the third quarter of this year, while UBS increased its forecast for Brent to $75 a barrel and for US West Texas Intermediate crude to $72 a barrel in the second half. From 2021.

In addition, the market received a boost after a report showed that the US economy created more jobs than expected in February.

The recovery in oil prices to pre-pandemic levels also encouraged US oil companies to return to ramp up activity. Baker Hughes Energy Services reported that the number of operating rigs increased by one this week after six consecutive weeks of increase.

USD

The dollar rose to its highest level in several months against the euro, the yen and the Swiss franc after Fed Chairman Jerome Powell did not express concern about the recent wave of bond selling and stuck to his position to keep interest rates low for a long time.

In a forum for the Wall Street Journal on Thursday, Powell said a wave of Treasury bond sales was not disrupting the system and was unlikely to push long-term interest rates so high that it would prompt the Federal Reserve to intervene more aggressively. His comments reignited the wave of selling in Treasury bonds.

He also reiterated that he is committed to maintaining a very easy monetary policy until the economy goes “a very long way on the road to recovery.”

Wall Street

Wall Street closed the week sharply higher after a choppy session, as the Nasdaq rebounded at the end of a week that saw it fall nearly 10% from a record high it reached earlier.

The Dow Jones Industrial Average rose 1.86% to 31,497.94 points, the S&P 500 index closed 1.95% higher to 3,841.78 points, and the Nasdaq Composite Index increased 1.55% to 12,920.15 points.

Calendar

The US economy added 379,000 jobs in February, blowing out expectations for a 200,000 gain. January’s figure also was revised, from 49,000 to 166,000.

In regards to the unemployment rate, this remained unchanged at 6.3% while average hourly earnings m/m hit the 0.2% forecasts.

Overall, this is an encouraging jobs report that wills most likely fuel expectations around the US economy rebounding faster than expected.

The economic activity in the US’ service sector continued to expand in February albeit at a softer pace than it did in January with the ISM Services PMI declining to 55.3 from 58.7 This reading missed the market expectation of 58.7.

The business activity in the US manufacturing sector grew at its strongest pace in three years with the ISM Manufacturing PMI rising to 60.8 from 58.7 in January. This reading came in higher than the market expectation of 58.8.

In Canada, The business activity in Canada’s manufacturing sector expanded at a stronger pace in February than it did in January with the IHS Markit Manufacturing PMI rising to 54.8 from 54.4.

As for the Eurozone, According to Eurostat’s preliminary reading of the Eurozone CPI report, the annual figure came in at 0.9% in February, missing expectations of 1% while remaining unchanged from the previous.

The core figures rose by 1.1%% YoY in February when compared to 1.1% expectations and 1.4% registered in January.

The data published by Eurostat showed that Retail Sales in the euro area contracted by 5.9% on a monthly basis in January. This reading followed December’s increase of 1.8% and fell short of the market expectation for a decline of 1.1%. On a yearly basis, Retail Sales fell by 6.4%.

Other data from the euro area revealed that the Unemployment Rate stayed unchanged at 8.1% in January and came in better than analysts’ estimate of 8.3%.

in the UK, The UK services sector activity fell short of expectations in February, the final report from IHS Markit confirmed this Wednesday.

The seasonally adjusted IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) was revised higher to 49.5 in February versus 49.7 expected and a 49.7 – last month’s flash reading.

he UK manufacturing sector activity expanded at a faster pace than expected in the month of February, the final report from IHS Markit confirmed on Monday. 

The seasonally adjusted IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) was revised higher to 55.1 in February versus 54.9 expected and 54.9 first readout.

In Germany, Factory Orders increased more-than-expected in January, suggesting that the manufacturing sector in Europe’s economic powerhouse kicked off 2021 on a positive footing.

Contracts for goods ‘Made in Germany’ arrived at +1.4% on the month vs. 0.7% expected and -2.2% last, the latest data published by the Federal Statistics Office showed on last Friday.

On an annualized basis, Germany’s Industrial Orders rose by 2.5% in the reported month vs. 6.1% previous and 6.4% expectations.

Inflation in Germany, as measured by the Consumer Price Index (CPI), edged lower to 0.7% on a monthly basis in February, Destatis reported in its flash estimate on Monday. Moreover, the annual CPI rose to 1.3% from 1% and came in higher than analysts’ estimate of 1.2%.

By moving to China, Caixin services PMI for February came in at 51.5 vs. 52.0 last, which showed that the business activity grew at the slowest pace in ten months.

The Composite Output Index also fell from 52.2 in January to 51.7 in February.

Coronavirus

The spotlight has been put on the spot again on the distribution of the Coronavirus vaccine in Europe after the Italian government blocked a shipment of the Oxford AstraZeneca vaccines to Australia.

The European Union has struggled to distribute the doses of the Coronavaccine throughout the 27-nation bloc, which is lagging behind other developed economies in the number of vaccinations per citizen.

There are complaints that regulators are too slow to approve vaccines, and there have been issues with manufacturing, delivery and red tape, hindering the process.

But new questions arose on Thursday when Italy became the first country in the European Union to use the bloc’s new regulations that allow exports to be halted if needed.

This step stopped shipping about 250,000 doses of the vaccine from its Italian factory to Australia.

The Italian Ministry of Health said that the country recorded 297 new deaths from the Coronavirus, compared with 339 the previous day, while the daily number of cases increased to 24 thousand and 36 cases from 22 thousand and 865 the previous day

Italy has recorded 99,271 deaths from Covid-19 since the disease appeared in it in February of last year, which is the second largest death toll in Europe after Britain and the seventh in the world.

The total number of injuries in Italy has also increased to 3.02 million so far.

In the Uk, Health authorities said that more than 21 million people have so far received the first dose of a vaccine to prevent corona virus.

  The Public Health Authority also said that today it recorded 236 new deaths from the virus.