Daily Market Commentary 4th March 2021

US Bond Yields resumed their upward moves, rising up above 1.48%, putting the brakes on equity markets. Services PMI data in Europe and the US was weak, as expected, hit by the impact of economic disruptions from lockdowns and associated restrictive measures. The ISM Non Manufacturing numbers in the US, were lower than expected and the ADP Report showed lower than expected private sector jobs added to the economy, as a fore-runner to the all important Non Farm Payrolls out Friday. The weaker economic data did little to disturb the rise in Bond yields, which resumed. The Dollar was resilient, with the EUR drifting to 1.2050, while the GBP struggled at 1.3960 digesting a crucial budget.

The Australian Q4 GDP number beat all expectations and follows an equally strong Q3 number, combining for a massive surge in growth in the economy for the second half of 2020. The Q4 number came in at 3.1%, following a Q3 of 3.4%, reflecting the strong economic recovery the economy was experiencing. This would put strong upward pressure on interest rates and inflation, combining with surging commodity prices, should have boosted the Australian currency. The RBA revealed additional QE purchases to combat the rise in interest rates, in an effort to stimulate the economy, if the form of wages and jobs. The RBA has been successful in curbing demand for bonds and undermined the rally in the AUD, which drifted to below 0.7800, while the NZD fell back to 0.7250.

Market focus remains on Bond Yields, which have dampened enthusiasm for equities, as Central Banks work to counter the upward pressure in interest rates.