As we approach the open... - 3/30/21

   

 3/30/21

After a week or so of respite, with a family fund blow-up helping to keep traders otherwise occupied, attention has circled back to interest rates with the 10-year yield moving this morning to a new recovery high up at one point five more basis points to 1.77%.  This (along with the weak buying interest highlighted in last night's summary) has predictably pressured growth stocks with the NDX indicated down seven tenths. SPX also indicated down three tenths while RUT is "least bad" at down one tenth.  These are well off the best levels of the overnight session.  Banks are up on the steepening yield curve (2/10 now widest since 2015) and some overdone selling in yesterday's session, but overall the negative correlation between yields and stocks remains.

The fears over runaway bond yields is evident in the latest BoA survey where for the first time since the pandemic began Covid was not the top worry.  Now it's inflation.  

As we're about to lap a huge deflationary period when the pandemic began, as well as now dealing with further strain from the Suez situation...

...be ready for a lot more volatility around this issue until the market comes to terms with it.  And it's not just the US.  Yields in Europe and Australia are also similarly on the rise.  That said, I do think the "easy move" is over with as we reversed the pandemic falloff.  

Asia

Major Asian markets generally finished positive with India leading finishing up over 2%. S Korea also closed up over 1%. Japanese retail sales were up m/m much more than expected (still down 1.5% y/y) as were those in Hong Kong (y/y comparisons there are now worthless given the lapping of the pandemic). BoJ head Kuroda also clarified that they'd be buying at least 12TJPY of ETF'.  

Europe

Europe also trades to the upside with the German DAX hitting a fresh record high. EU March final read on economic sentiment improved to over the 100 level while consumer confidence remained unchanged and in negative territory.  Industrial confidence up and over 0 line, while services improved but remained negative. French consumer confidence also beat as did Spanish retail sales. A plethora of price data was released all of which appeared to be basically in line (and a little slower growth m/m).

US Data

No US data before the open, but we did get the Dallas Fed last night, rounding out the Fed surveys with another beat (KC was the only that didn't beat but was at a very solid 26 reading).  Sure, a lot of this is prices, but a lot is all the stuff that makes the economy go (new orders, backlogs, employment, etc.).

US Commodities/Currencies/Bonds

Noted the rise in long bond yields above. This giving some further support to the dollar which has lifted further above that 200-DMA with DXY now over 93 for the first time since November. This in turn is pressuring commodities with gold, copper, and crude all down solidly with gold quickly heading for a retest of the March lows. A break of that sets up another test of that trendline. This is undoing a lot of good that was done with the technicals of late.

Oil will be volatile the rest of the week as the OPEC+ meeting gets under way. The joint technical committee meeting has started. Headlines last night (and so expectations at this point) are for a rollover of current output cuts (except that Russia of course gets a little bit more).

Saudi Arabia Ready To Support OPEC+ Oil Cut Extension Into May And June - RTRS Sources - Ready To Extend Voluntary Cut

Russia supports OPEC+ oil output rollover to May, seeks small rise for itself - source

But headlines this morning are a little more circumspect perhaps also leading to some of the pullback in oil.  

A Saudi source when asked about an article related to the Saudi position being in favor of rollover said “we haven’t even started consultations yet” 

Russia noting that their increase in supply was not sufficient to meet demand growth- sources at JTC

So we'll see where this all goes. Also, FWIW OPEC now forecasts surplus to be gone by end of Q2 if output cuts are rolled over.

Misc.

Couple of good news pieces on Covid vaccines overnight was the report from CDC that the mRNA shots provide up to 90% protection against infection (meaning they not only prevent illness but prevent the ability to spread). I think this is huge news. Also, BioNTech raised their 2021 Covid-19 vaccine target by 25% to 2.5B doses. Can't complain about that. And it's coming just in time in the US where hospitalizations have started climbing again.

To see more content, including summaries of some of today's economic reports and my nightly Summary go to https://sethiassociates.blogspot.com