Markets Update Wednesday 24/03/2021 – Ultra-expansive

Frankfurt – 24/03/2021

Ultra-expansive

The markets once again focused on US Federal Reserve Chairman Jerome Powell’s remarks to the US Senate Banking Committee today. Powell expects a strong upswing in the current year. In terms of economic growth, 2021 promises to be a “very, very strong year”, he said. This expectation is also reflected in the latest projections of the monetary watchdogs. On average, they expect US gross domestic product (GDP) to grow by a whopping 6.5 per cent this year, which would even exceed China’s growth target.

Since the economic recovery is far from complete, the Fed will continue to support the economy for as long as necessary, Powell told the committee. He expects inflation to pick up, but the effects are likely to be temporary. 

The Fed intends to maintain its monthly securities purchases of 120 billion dollars following its targets until “substantial further progress” is made towards full employment and price stability. 

The corona crisis is also back on the radar of the financial markets. Especially in continental Europe, rising infection figures are leading to further restrictions and weigh on the overall market sentiment.

Uncertainty and confusion, for example, continue to be instigated by the government here in Germany. Contradictory decisions and constant back and forth do not help the mood here in any way.

US Markets at a glance

The US leading index hardly moved on Wednesday, falling by a marginal 0.01 per cent to 32,420.78 points at the end of the day. The tech index NASDAQ Composite fell sharply again and closed 2.01 per cent lower at 12,961.89 points.

Falling bond yields initially supported the Dow leading index. Also, US Federal Reserve Chairman Jerome Powell endeavoured to calm the tempers over the recent rise in bond interest rates. 

Besides, weak new orders for durable goods fuelled hopes that interest rates would remain low. “It doesn’t look like a strong recovery for the economy, but it’s good for the bond markets,” one trader said, according to Dow Jones Newswires.

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Far East Markets at a glance

On the stock exchanges in the Far East, the downward trend of the previous day continued. The Japanese benchmark index Nikkei 225 was down 2.04 per cent at 28,405.52 points, while the Shanghai Composite in mainland China fell by 1.3 per cent to 3,367.06 points. Hong Kong’s leading index Hang Seng lost 2.03 per cent to 27,918.14 units.

Corona and the related lockdown worries weighed heavily on the stock market sentiment: Uncertainty about increasing economic weakness is considered a serious negative factor regarding the third wave in Europe.

European Markets at a glance

The European stock exchanges were cautious on Wednesday and less active than the stock markets elsewhere. The EuroSTOXX 50 went into the evening with a small plus of 0.14 per cent at 3,832.55 points.

On the German stock market, investors did not dare to take risks today. The DAX fell moderately by 0.4 per cent and closed at 14,610 points. Besides, the TecDAX extended its initial loss in the further course and closed 1.11 per cent lighter in the evening at 3,378.20 points.

The pandemic’s worries caused investors to shy away from risk – this was mainly due to the ongoing measures to contain the virus.

The further postponement of the lifting of corona restrictions and the political chaos surrounding Germany’s Easter holidays weighed on investor sentiment. Even the fact that, according to the Purchasing Managers’ Index, the eurozone economy is back on the growth track for the first time in half a year did not inspire a buying mood.

On the corporate side, other balance sheets were in focus. Among them was blue-chip E.ON: the energy company met its targets and expects higher profits in 2021.

Forex, gold, oil and crypto

The euro remained slightly above the 1.18 dollar mark late in the evening in generally quiet trading on the foreign exchange market. That is a good one cent less than at the beginning of the week. Rising bond yields in the US continued to cause the euro to weaken and the greenback to appreciate today. 

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Oil prices rose sharply after the recent losses. The reason: a freighter ran aground in the Suez Canal during the night and has since blocked the important shipping route between Asia and Europe. A considerable part of the Middle East’s energy transports to Europe and the USA passes through the canal. On Tuesday, oil prices had fallen significantly to their lowest level since the beginning of February. Brent North Sea oil rose by 2.88 dollars to 63.67 US dollars per barrel. WTI light oil from the USA increased by 2.80 dollars to 60.56 US dollars.

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Gold was sought as a safe haven against rising bond yields and international tensions, closing at $1,733 a troy ounce. 

Cryptocurrencies, as riskier assets, fell today, with Bitcoin losing 2.5 per cent to $52,500 and Ethereum dropping 4.9 per cent to $1,580. XRP and THETA fell even more sharply after having increased strongly over the past few days. XRP fell by 9.8 per cent to $0.49, while THETA dropped over 12 per cent to $11.20.

Corporate and world economic news

Economic data

In Great Britain, the general upward trend in prices weakened in February. Compared to the same month last year, consumer prices rose by 0.4 per cent, the statistics office ONS announced in London on Wednesday. In January, the annual rate had been 0.7 per cent. Analysts had expected an increase to an average of 0.8 per cent in February. Month-on-month, the cost of living increased slightly by 0.1 per cent.

Thanks to the booming industry and partial easing in the service sector, the German economy experienced a substantial growth spurt in March. According to data in the first release for the month, IHS Markit’s composite index for private-sector production – industry and service providers combined – improved to 56.8 from 51.1 points in the previous month.

Business sentiment in the eurozone brightened considerably in March. At 52.5 points, the Markit Purchasing Managers’ Index signalled economic growth again. The indicator, which is based on a survey, rose by 3.7 points compared to the previous month, as the IHS Markit institute announced in London on Wednesday. Analysts had expected a much weaker increase to an average of only 49.1 points.

New orders for durable goods in the USA fell in February, contrary to expectations. As reported by the US Department of Commerce, orders fell by 1.1 per cent compared to the previous month. Economists surveyed by Dow Jones Newswires had expected an increase of 0.4 per cent.

The US economy continued its robust growth in March, although momentum slowed a little. The composite index for production in the private sector surveyed by IHS Markit fell to 59.1 from 59.5 points in the previous month. 

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