US Stocks Rise as Tech Lags; Treasuries Climb

US equities advanced as the rotation into value stocks resumed following a weak inflation report. Treasury yields turned lower after a 10-year note auction. The dollar weakened. The S&P 500 rose by 0.60% to 3,898.81 while Dow Jones was up 464.28 points (1.46%) to 32,297.02.

House Sends Aid Bill to Biden, Checks to US Pocketbooks

President Joe Biden’s US$1.9 trillion Covid-19 relief bill cleared its final congressional hurdle, with the House passing the bill on a 220-to-211 vote, sending it to the president for his signature. The vote caps a nearly two-month sprint from the time Biden first unveiled his American Rescue Plan, through tough negotiations in the Senate to its final approval largely in the form it was first proposed.

US Budget Deficit Tops US$1 Trillion This Year, Before Stimulus

The US budget deficit surpassed US$1 trillion for the first five months of the fiscal year, reflecting government efforts to cushion the economy from the coronavirus even before a massive stimulus package deepens the shortfall. The gap for February was US$310.9 billion, up from US$235.3 billion in February 2020, according to a Treasury Department report.

Bank of Canada Stands Pat on Stimulus Amid Job-market Slack

The Bank of Canada left interest rates and its asset purchase program unchanged, in a decision that may dampen speculation of an imminent paring back of its stimulus campaign. Policy makers led by Governor Tiff Macklem held the bank’s overnight rate at 0.25% and reiterated a pledge to not raise borrowing costs before damage from the pandemic is fully repaired -- something the central bank doesn’t anticipate will happen until 2023.

ECB Draft Forecasts Assume Any Inflation Pickup Will be Fleeting

The European Central Bank’s forecasts this week are likely to justify the current stimulus program with a cautious view that envisages no sustained jump in inflation, according to officials with knowledge of the matter. The outlook that will be presented to policy makers assumes that hoarded savings won’t be depleted in a sudden consumption boom when lockdown restrictions ease, said the officials.

German Finance Minister Predicts Demise of Budget Austerity

German Finance Minister Olaf Scholz predicted that austerity will lose out to more expansive budget policies in coming years, further distancing himself from Chancellor Angela Merkel’s conservatives ahead of September’s general election. “The decision is really between austerity or continuing to make sure that the necessary investments are made and there is adequate financing for the welfare state,” Scholz said.

BOJ Is Said to Seek Freer Yield Fluctuations After Policy Review

Bank of Japan officials are looking at ways to enable bond yields to fluctuate more freely in their review of monetary policy, according to people familiar with the matter. Some of the officials want to find ways to generate more fluctuations while sticking with the current movement range of around 20 basis points either side of the BOJ’s zero target on 10-year government debt, the people said.

Oil Rises With US Gasoline Supplies Sliding to Four-month Low

Oil closed higher after traders assessed a US government report showing the largest two-week decline in gasoline supplies on record, while signs emerged of demand picking up. Brent crude for May settlement gained US$0.38 to US$67.90 per barrel.

Source: Affin Hwang Research - 12 Mar 2021