Stocks Slump Amid Inflation Concern; Oil Tumbles

Stocks fell from record highs, oil slumped and Treasury yields touched some of the highest levels in more than a year amid concern the Federal Reserve risks letting inflation accelerate. The S&P 500 dropped by 1.48% to 3,915.46 while Dow Jones was down 153.07 points (0.46%) to 32,862.30.

US Jobless Claims Unexpectedly Increase to a One-month High

Applications for US jobless benefits unexpectedly rose last week, to the highest since mid-February, underscoring how the labor market is recovering in fits and starts. Initial claims in regular state programs rose by 45,000 to 770,000 in the week ended March 13, Labor Department data showed. On an unadjusted basis, the claims rose by 24,318 to 746,496.

BOE Passes on Opportunity to Confront a Surge in Bond Yields

BOE delivered a slightly more upbeat assessment of the UK economy, sidestepping an opportunity to cool a surge a market interest rates. The central bank’s Monetary Policy Committee left the pace of its stimulus unchanged as expected, noting economic output fell less than anticipated in January. Minutes of the meeting mentioned “upside” risks seven times, up from two in February.

ECB’s Lagarde Says Governments Must Get Fiscal Stimulus Done

European Central Bank President Christine Lagarde said governments must make sure to roll out their joint spending plan on time to ensure the region’s recovery from the coronavirus pandemic. The US$896 billion recovery fund “should become operational without delay,” Lagarde told lawmakers in the European Parliament. She believes that by brightening economic prospects for firms and households, fiscal policy would also strengthen the transmission of our monetary policy measures.

French Government Announces Monthlong Lockdown in Paris Area

French President Emmanuel Macron is locking down several regions including the Paris area, slowing down the country’s economic recovery as it struggles to contain a third wave of the coronavirus epidemic. Only essential businesses and schools will stay open, Prime Minister Jean Castex announced. The measures will start from midnight on Friday and will remain in place for four weeks.

Bank Indonesia Holds Rate, Pledges More Support for Rupiah

Indonesia’s central bank left its benchmark interest rate unchanged and pledged to do more to support a currency that has weakened as US yields rise. Bank Indonesia kept the seven-day reverse repurchase rate at 3.5%. Governor Perry Warjiyo and his board have cut the rate by 150 basis points since the beginning of last year to bolter the economy during the coronavirus pandemic.

Australia Unemployment Drops to 5.8% as Recovery Strengthens

Australia’s jobless rate tumbled in February as rising sentiment from a vaccine rollout combined with fiscal and monetary stimulus accelerated the economy’s recovery and returned employment to pre-pandemic levels. Unemployment dropped to 5.8% from a revised 6.3% in January, data from the statistics bureau showed in Sydney.

Oil Falls by Most in 6 Months as Recovery Falters

Oil plunged by 7%, the most since September, as vaccination efforts in some parts of the world stalled, casting uncertainty over the speed of an economic recovery and a full rebound in global oil demand. Brent crude for May settlement dropped US$4.72 to US$63.28 per barrel.

Source: Affin Hwang Research - 19 Mar 2021