Markets Update Friday 05/03/2021 – A Turbulent Week

Frankfurt – 05/03/2021

A Turbulent Week

For a long time this trading week, investors were torn between economic hope and interest rate fear. In the end, hope prevailed, at least in the USA, and Wall Street closed clearly up after a rollercoaster ride. The weekly balance sheet, therefore, no longer looks quite so bleak.

At the same time, positive job data, in particular, initially brought relief to the stock markets. But then the other side of the coin became apparent: the recovery on the US labour market drove up the yields of ten-year US government bonds again – to a good 1.6 per cent, the highest level in a year. Investors promptly pulled the emergency brake, and the Wall Street indices slid into the red. Because when interest rates rise, bonds become an alternative to shares. The rise in interest rates had already slowed down the stock markets in recent days, in some cases like the Nasdaq considerably.

In the evening, the situation on the bond market eased somewhat. The yield on US government bonds with a ten-year maturity fell again to 1.57 per cent, and thus investors returned to the stock markets.

US Markets at a glance

After a rollercoaster ride, Wall Street ended the week on a positive note.

After temporary losses, the Dow Jones finally turned back into positive territory and gained 1.85 per cent to 31,496.30 points at the close of trading. The NASDAQ Composite performed similarly and closed 1.55 per cent higher at 12,920.15 points.

Once again, the development of yields set the tone. Despite a surprisingly good US labour market report, these rose and pulled the indices into the red after substantial initial gains. With a slight decline in yields, the stock market also recovered and turned positive again. 

Upbeat labour market data from the NFP report provided an additional tailwind.

Far East Markets at a glance

The signs on the stock exchanges in the Far East were mixed.

The Japanese benchmark index Nikkei was 0.23 per cent weaker at 28,864.32 points at the end of trading. The Shanghai Composite initially rose on the Chinese mainland but gave up its gains and closed 0.04 per cent weaker at 3,501.99 points. In Hong Kong, the leading index Hang Seng went into the weekend 0.47 per cent down at 29,098.29 points.

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Uncertainty prevailed due to rising bond yields in the USA and other regions. The fact that bond yields rose in the face of rising inflation and economic expectations is not the problem – but the pace is worrying investors. 

Tsunami warnings for the entire Pacific also exacerbated unrest on the markets.

European Markets at a glance

The mood on the trading floors in Europe was rather negative today. The EuroSTOXX 50 already fell at the opening. It then maintained a negative trend and ended trading 0.96 per cent weaker at 3,669.34 points.

The late turnaround for the better on Wall Street could not help the German stock market either. The German stock market barometer finally left the trading session with a loss of 0.97 per cent to 13,920.69 points. Nevertheless, the DAX recorded a plus of 1 per cent for the week. The TecDAX also remained in the red territory and ended the day 1.71 per cent lower at 3,214.75 points, having already started lower.

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US Federal Reserve Chairman Jerome Powell only partially eased inflation concerns with his speech the previous evening. “I would be concerned about disorderly conditions in the markets or a continued tightening of financial conditions if it jeopardised the achievement of our objectives,” he said regarding the rise in capital market rates. However, he did not see any danger of inflation.

Meanwhile, investors were optimistic about surprisingly positive data on the US labour market.

Forex, gold, oil and crypto

The euro fell below 1.19 US dollars for the first time in three months on Friday. At 1.1893 US dollars, it reached its lowest level on the forex market since the beginning of December. In New York trading, the European single currency last cost 1.1916 dollars. The greenback is benefiting because higher interest rates are attracting foreign money to the USA.

Oil prices extended their significant gains from the previous day. The oil association OPEC+ did not initially increase its production and thus caused a surprise on the markets. A barrel of North Sea Brent sells for 68.85 US dollars, 2.11 dollars more than at the close of trading the previous day. The price for American crude oil WTI rose by 1.87 dollars to 65.72 US dollars.

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The price of gold reacted, as usual, with larger swings on the NFP report but held overall stable and closed almost unchanged at the $1,700 round-mark. 

The cryptocurrency market appreciated slightly after yesterday’s setback, and Bitcoin climbed back above the $48,000 mark with a 2.8 per cent increase. Ethereum faired even better and grew 6.2 per cent to $1,568, and XRP added 1.1 per cent to $0.4620.

Corporate and world economic news

Economic data

The US labour market got off to a better-than-expected start in February. The US Department of Labour reported in the highly anticipated NFP report that 379,000 additional jobs were created in the private and public sectors. Economists surveyed by Dow Jones Newswires had expected an increase of only 210,000 jobs. The separately analysed unemployment rate fell to 6.2 per cent in February from 6.3 per cent in January, while economists had expected the rate to hold steady at 6.3 per cent.

German industry landed a surprisingly large number of orders in January, despite the lockdown situation in Germany and many other countries. Orders grew by 1.4 per cent compared to the previous month due to better demand from abroad. Economists had only expected half as strong increase of 0.7 per cent. In December, there had still been a decline of a revised 2.2 per cent.

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