Weekly Recap: 8-12 March

Weekly Recap: 8-12 March

The second week of March saw the official ratification of a huge stimulus package in the United States called the “American Rescue Plan” that was signed by President Joe Biden after being passed by Congress. The $1.9 trillion relief plan will raise direct monthly payments to American households by $1,400; allocate $350 billion to state and local government aids; as well as $20 billion in spending on the vaccination program.

The week saw some fluctuations for the U.S Treasury bond yields and subsequently the U.S Dollar (USD), but once again, yields ended the week near their highest level in a year. Recent inflation data helped ease reflation fears and improved risk sentiment. Moreover, better than expected jobs data fueled expectations for economic recovery.

Dollar

The Dollar Index (DXY), which measures the greenback’s performance against a basket of six major international currencies, declined for the week by about 0.35%, as it closed Friday on a relative rebound at 91.66, after giving up most of the gains it achieved on Tuesday when it reached its highest level in about three months with three consecutive daily declines.

Bitcoin

Bitcoin ended the week a little below $57,000 after re-approaching its all-time high of $58,350, recorded on February 21, earlier in the week amid expectations that increased stimulus spending in the U.S. could help raise demand for the digital currency.

The world’s largest cryptocurrency in terms of market capitalization surged by more than 97% since the beginning of 2021, supported by increased demand, especially from institutional investors, after beginning the year below $30,000.

Gold

Gold futures limited their weekly rise by falling on Friday, after rising for three consecutive sessions, ending the week at $1,719.80 per ounce, rising by about 1.3% on a weekly basis.

The passing of the relief bill helped gold prices maintain the recovery from the nine-month low that it reached in the previous meeting due to the surge in Treasury bond yields.

The $1,700 level is now seen as the key support level for the yellow metal, which could be heading towards $1,730 if bond yields continued to pull back from their record highs.

Oil

Oil registered small weekly losses, compared with gains of more than 7% in the previous week, which were mainly attributed to selling pressures resulting from profit making.

Brent crude futures closed the week below the $70 level at $69.19 per barrel, falling by 0.25% for the week. Meanwhile, the West Texas Intermediate (WTI) futures finished at $65.61 a barrel to register a weekly decline of 0.7%.

In an indicator of production levels in the coming period, the number of active rigs drilling for crude oil in the United States declined for the first week since November, reaching 309, while the total rig count declined amounted to 402.

Nonetheless, crude prices remain supported by positive expectations, especially after the Organization of the Petroleum Exporting Countries (OPEC) revised upwards its forecast for the recovery of the global demand for crude oil, expecting it to be focused on the second half (H2) of 2021. OPEC’s monthly report, released on Thursday, expects global demand will rise by 5.89 million barrels per day (b/d) in 2021, raising its forecast by 6.5% compared with its previous report. “Total oil demand is foreseen to reach 96.3 million b/d with most consumption appearing in the second half,” the report noted.

European Stocks

European stocks saw a positive week, supported by the easing of reflation fears and positive expectations of economic recovery and wider distributions of Coronavirus vaccines.

The pan-European STOXX 600 index recorded weekly gains of 3.5%, to register its best weekly performance since November of last year. Earlier in the week, the index reached its best level since late February 2020, while the blue-chip index STOXX 50 hit its highest level in 13 months, however, small losses on Friday limited the weekly gains of European shares.

Wall Street

The Dow Jones Industrial Average and the S&P 500 indices finished the week at an all-time high, after breaking their records in two consecutive session at the end of the week, while the Nasdaq limited its weekly gains as Treasury bond yields rebounded by the end of week.

The Dow finished the week at a record 32,778.64 points, rising by a little over 4% for the week, the S&P 500 added 2.6% and closed at a record high of 3,943.34 points, and the Nasdaq added 3.1% for the week and closed at 13,319.86 points.

Currencies

The Euro closed last week on the upside, supported by the continuation of the Coronavirus vaccination in the Eurozone in addition to good economic data. The ECB announced that it would accelerate its purchase of Eurobonds under its emergency PEPP program, in response to rising yields. The ECB did not specify the amount or time frame of the new purchases

The euro rose against the US dollar to 1.1950 against 1.1907 posted last week, and the pair recorded a weekly low of 1.1835 and a high of 1.1990.

As for the pound sterling, it ended the week higher after support from anti-Coronavirus vaccinations, with the government’s decisions to extend the financial aid until the end of September.

The sterling rose against the US dollar to 1.3910 against 1.3830 the previous week, recording a low of 1.3800 and a high of 1.4004 during the past week.

Calendar

In the UK, the GDP came out better than market expectations. The UK GDP monthly release showed that the economy contracted less-than-expected in January at -2.9% vs. -4.9% expected and1.2% previous.

Meanwhile, the Index of services (Jan) arrived at -2.4% 3M/3M vs. 0.6% previous. The economy is reporting negative growth for the second time in three months, raising concerns about the health of the economy.

The Gross Domestic Product (GDP) in the Eurozone contracted by 4.9% on a yearly basis in Q4. This reading came in slightly better than the flash estimate and the market expectation of -5%. On a quarterly basis, the GDP declined by 0.7%.

Other data from the euro area revealed that the Employment Change in the fourth quarter was +0.3% as estimated.

In the US, inflation ticked higher in February, much to the relief of the market, which has been concerned that pent-up demand could lead to runaway inflation. Inflation in the US, as measured by the Consumer Price Index (CPI), arrived at 0.4% on a monthly basis in February and matched analysts’ estimates. On a yearly basis, the CPI rose to 1.7% as expected, the data published by the US Bureau of Labor Statistics showed on Wednesday.

Moreover, the annual Core CPI, which excludes volatile food and energy prices, edged lower to 1.3% and missed the market consensus of 1.4%.

The Producer Price Index (PPI) in the US for final demand fell to 0.5% in February from 1.3% in January as expected, the monthly report published by the US Bureau of Labor Statistics showed. On a yearly basis, the PPI rose to 2.8% from 1.7%. The annual Core PPI climbed to 2.5% from 2% but came in slightly lower than analysts’ estimate of 2.6%.

As for US job claims, there were 712,000 initial claims for unemployment benefits in the US during the week ending March 4. This reading followed the previous print of 754,000 (revised from 745,000) and came in better than the market expectation of 725,000.

The Consumer Sentiment Index in the US improved sharply to 83 in March from 76.8 in February. This reading came in much better than the market expectation of 78.5. The Current Economic Conditions Index rose to 91.5 from 86.2 and the Consumer Expectations Index climbed to 77.5 from 70.7. Finally, the 1-year Inflation Outlook declined to 3.1% from 3.3%.

The number of job openings on the last business day of January was 6.9 million, the US Bureau of Labor Statistics announced. This reading came in better than the market expectation of 6.6 million.

Canada posted outstanding employment numbers, which sent the Canadian dollar higher on Friday. The Unemployment Rate in Canada dropped to 8.2% in February from 9.4% in January and came in much better than the market expectation of 9.2%.

Further details of the jobs report published by Statistics Canada revealed that employment in that period increased by 259,000 after falling by 266,000 over the previous two months.

Wholesale Sales in Canada rose by 4% in January to $69.2 billion. This reading came after December’s decline of 1.1% and slightly weaker than the market expectation for an increase of 5%.

Brexit

Trade between Britain and the European Union witnessed a sharp decline in the first month of the application of the new relations between the two parties after Britain’s withdrawal from the bloc (Brexit), amid record declines in British exports and imports of goods in light of the continuing restrictions to combat Covid-19 on both sides.

The Office for National Statistics said that British goods exports to the European Union, excluding non-monetary gold and other precious metals, fell 40.7% in January compared to December, and imports decreased 28.8%, another record.

The Office for National Statistics stated that the Covid-19 pandemic, which led to the imposition of general isolation measures in Britain in January, made it difficult to determine the impact of leaving the Union and the subsequent application of new customs arrangements, and the method of data collection also changed.

But there were still indications that the split was having a negative effect.

On the other hand, the European Commission intends to launch two measures against Britain, which Brussels believes has violated the Brexit agreement by delaying sensitive customs measures in Northern Ireland, according to the French Press Agency, citing sources.

The Commission this week received support for the move by member states, who were informed that measures could be launched “next week at the earliest.”

Brussels is furious over London’s announcement of a unilateral six-month delay to 1 October of inspections of goods arriving in Northern Ireland from the British mainland.

While the European Union condemned what it considered a “breach” of the Brexit agreement, it pledged to respond quickly to the move that Britain decided on, just two months after the United Kingdom formally left the European Common Market.

Coronavirus

The Dutch government said that it will suspend the use of AstraZeneca’s coronavirus vaccine until at least March 29 as a precaution.

The government said the move, which came on the heels of a similar decision taken by Ireland earlier in the day, was based on reports from Denmark and Norway of potentially dangerous side effects.

Norwegian health authorities said, Saturday, that three health workers in Norway who recently received the vaccine are receiving hospital treatment for bleeding, blood clots, and low platelet count.

On the other hand, AstraZeneca reported today that it conducted a review of those who received its coronavirus vaccine that resulted in no signs of an increased risk of blood clots.

The review included more than 17 million who had received the vaccine in the European Union and Britain.

The data of the French Ministry of Health showed that 26,343 new cases of Coronavirus were recorded on Sunday, down from 29,759.

The number of deaths due to infection with the virus increased by 140 to a total of 90,429, including 65,118 in hospitals.

The Spanish government said that the Council of Ministers approved on Friday, a package worth 11 billion euros, or 13.1 billion dollars, for small and medium-sized companies to help them overcome the crisis caused by the Covid-19 pandemic, of which 7 billion euros are direct aid.

The package also includes three billion euros allocated for the voluntary restructuring of debt provided by banks with state support to companies affected by the pandemic, much of it in the tourism sector, while one billion euros will be allocated in the form of capital injections.