US Stocks Decline as Oil Tumbles, Bonds Advance

US equities fell, with companies that would benefit from an end to lockdowns faring the worst, amid concern that rising virus cases and new restrictions in Germany signal the global reopening will be delayed. The S&P 500 dropped by 0.76% to 3,910.52 while Dow Jones was down 308.05 points (0.94%) to 32,423.15.

Powell Expects Bump in Inflation, Says It Won’t Get Out of Hand

Federal Reserve Chairman Jerome Powell said prices would rise this year as the pandemic recedes and Americans are able to go out and spend, but he played down the risk that this would spur unwanted inflation. They expect that inflation will move up over the course of this year. Their best view is that the effect on inflation will be neither particularly large nor persistent.

Fed’s Kaplan Estimates First US Rate Increase Will be in 2022

Dallas Fed’s President Robert Kaplan said he is among policy makers estimating that the central bank will have to raise interest rates next year. “There were some dots starting increases in 2022.” He admitted that he was one of those Fed’s dots, which is used to signal its outlook for the path of interest rates. Kaplan forecasts economic growth of 6% growth for this year and sees the unemployment rate declining to 4%.

IMF Mulls Creating US$650 Billion in Reserves After Yellen Nod

The International Monetary Fund is considering a plan to create as much as US$650 billion in additional reserve assets to help developing economies cope with the pandemic, with an eye on finalizing a decision next month, according to two people familiar with the plan. One of the priorities will be to consider how much to issue in the units known as special drawing rights.

Bank of Canada Lays Out Plans to Slow Qe, Halts Other Programs

BOC provided the greatest guidance yet into how it plans to slow purchases of government bonds as the economic recovery accelerates, fueling expectations it could begin doing so as soon as April. Deputy Governor Toni Gravelle said the central bank is winding down emergency liquidity programs it deployed to grease markets when the coronavirus hit last year, including programs to buy provincial and corporate debt.

UK Companies Start Hiring Again, Holding Back Unemployment

UK companies have started hiring in anticipation of an end to the coronavirus lockdowns, holding back the overall rate of unemployment. The number of employees on payrolls rose 68,000 in February 2021, the third consecutive monthly increase. Job vacancies from December 2020 to February 2021 increased by 8% to a total of 601,000.

Bank of Korea Lee Sees Faster Growth, Plays Down Rate Hike Odds

Bank of Korea Governor Lee Ju-yeol said he expects faster inflation and economic growth this year, but dismissed the view that the central bank needs to tighten policy early to tackle rising financial risks. Lee pointed to improving exports and investment, along with an extra budget pending parliamentary approval, as factors likely to drive economic growth beyond the BOK’s 3% forecast in February. Lee said inflation will also probably accelerate beyond the bank’s previous 1.3% projection.

Oil Plunge Deepens With Renewed Lockdowns Clouding Horizon

Oil tumbled to the lowest since early February as a string of renewed lockdown measures in Europe clouded the prospects for a speedy recovery in consumption. Brent crude for May settlement dropped US$3.83 to US$60.79 per barrel

Source: Affin Hwang Research - 24 Mar 2021