Stocks Slump as Treasury Yields Top 1.5% on Powell

Stocks and bonds sold off after Federal Reserve Chairman Jerome Powell underwhelmed markets by refraining from pushing back more forcefully against the recent spike in Treasury yields. The S&P 500 fell by 1.34% to 3,768.47 while Dow Jones was down 345.95 points (1.11%) to 30,924.14.

Powell Sends Dovish Message That Leaves Bond Market Disappointed

Federal Reserve Chair Jerome Powell sounded a gentle word of caution to the bond market on Thursday that he’s watching the jump higher in long-term interest rates, but stopped well short of trying to rein them in. The recent run-up in bond yields “was something that was notable and caught my attention,” he said. Bond yields have climbed in recent weeks on mounting expectations of stronger economic growth and faster inflation after the pandemic ends

Initial Claims for US Jobless Benefits Rose Slightly Last Week

Applications for US state unemployment insurance rose slightly last week, underscoring the pandemic’s lingering restraint on the labor market recovery. Initial jobless claims in regular state programs totaled 745,000 in the week ended Feb. 27, up 9,000 from the prior week, Labor Department data showed. Continuing claims -- an approximation of the number of people filing for ongoing state benefits -- fell to 4.3 million in the week ended Feb. 20 from 4.4 million.

ECB’s Knot Says Rising Yields Reflect Optimism About Outlook

Rising government bond yields are a “positive story” because they reflect expectations for an improving economy, European Central Bank Governing Council member Klaas Knot said. “There is reason to be optimistic about the second half of the year when the lockdowns will be lifted,” despite uncertainties about the current vaccination drive and businesses’ health, Knot said.

Scholz Says Germany Will Lift Debt Spending to Tackle Virus

Finance Minister Olaf Scholz said Germany will need to increase debt spending this year to help tackle the impact of the coronavirus crisis on Europe’s largest economy. This year’s budget currently foresees 180 billion euros in new borrowing and anything beyond that will require parliamentary approval.

France Lauds State Aid Plan as Post-crisis Model for Europe

France finally unveiled its long-awaited plan for using state aid to prevent a wave of bankruptcies in the nation after the pandemic, hailing it as a model for the rest of Europe. The innovative program, which has now been approved by the European Union, will combine private and public money to provide as much as 20 billion euros (US$24 billion) to strengthen the finances of small and medium-sized companies.

Philippine Central Bank Sees No Need to Act Yet on Inflation

With inflation in the Philippines at multi-year highs, Governor Benjamin Diokno said there’s no need for the central bank to act yet to control price pressures as domestic demand remains weak. Amid tepid demand, the factors driving price gains are mostly supply-related, and inflation expectations “remain well-anchored,” he said.

Oil Jumps After OPEC+ Surprises Market With Unchanged Output

Oil surged to the highest in nearly two years after the OPEC+ alliance surprised traders with its decision to keep output unchanged, signaling a tighter crude market in the months ahead. Brent crude for May settlement climbed US$2.67 to US$66.74 per barrel.

Source: Affin Hwang Research - 5 Mar 2021