Tech Drags Nasdaq 100 to Three-week Low; Oil Jumps

Tech stocks dropped on valuation concerns while commodities rallied and bond yields rose with investors pricing in stronger growth and faster inflation as the global economy recovers. The S&P 500 fell by 0.77% to 3,876.50 while Dow Jones was up 27.37 points (0.09%) to 31,521.69.

Biden Economy Chief Sees Jobs as More Urgent Risk Than Inflation

Inflation is a risk that bears watching, though the bigger danger now is longer-term damage to the labor market, the White House’s chief economic adviser said in addressing criticism of President Joe Biden’s US$1.9trn aid plan. “We take very seriously the economic risks that are out there, we spend a lot of time thinking about them, a lot of time worrying about them,” Brian Deese, director of the White House National Economic Council, said. Inflation is “a risk that we’re keeping our eye on and it’s something to consider,” he said.

Yellen and Powell Wary of Financial Froth While They Push Stimulus

US Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell appear wary of signs of froth in financial markets, even as they press ahead with economic stimulus measures that are elevating the euphoria. There “may be sectors where we should be very careful,” Yellen told, when asked about possible speculative sizzle.

ECB ‘closely Monitoring’ Bond Yields as Gains Spark Concern

European Central Bank (ECB) President Christine Lagarde said her institution is “closely monitoring” the market for government bonds, in a sign that she might act to prevent rising yields undermining the economic recovery from the pandemic. “Sovereign yields are particularly important. Banks use those yields as a reference when setting the price of their loans to households and firms,” she said. “Accordingly, the ECB is closely monitoring the evolution of longer-term nominal bond yields.”

BOE’s Vlieghe Says High Rates May Not Return in His Lifetime

Interest rates may stay at historically low levels for decades, according to Bank of England policy maker Gertjan Vlieghe. Asked how long it could be until borrowing costs reach the kind of levels seen as normal before the global financial crisis, Vlieghe replied “maybe not in my lifetime.” He added that rates during the 1970s and 1980s were unusually high, so lower levels would better represent the average.

German Business Confidence Brightens Amid Hopes for Recovery

German businesses are increasingly optimistic that economic momentum will pick up this year, despite extended lockdowns to combat new variants of the virus and a slow start to vaccinations. The Ifo Institute’s gauge of expectations for the next six months rose to 94.2 in February from 91.5 in January. The business climate index also gained, and companies were even slightly more upbeat about their present situation.

China Returns as Top India Trade Partner Even as Relations Sour

Two-way trade between China and India stood at US$77.7bn last year, according to provisional data from India’s commerce ministry. Although that was lower than the previous year’s US$85.5bn total, it was enough to make China the largest commercial partner displacing the US -- bilateral trade with whom came in at US$75.9bn amid muted demand for goods in the middle of a pandemic.

Oil Surges as Investors Bet Commodity Demand to Take Off

Oil surged as traders and investment banks see global supplies rapidly tightening in response to a vaccination-led recovery this summer. Brent crude for April settlement climbed US$2.33 to US$65.24 per barrel.

Source: Affin Hwang Research - 23 Feb 2021