1H March Global Market Recap
1st March 2021 – 15th March 2021
Global COVID-19 cases have reached 120 million on 15th March, according to data from Johns Hopkins University. The worldwide death toll has hit 2.67 million, and U.S. is leading all countries with death toll exceeding half a million.
The US economy added 379,000 jobs in February, far exceeding expectations of 182,000. Most of the new jobs were from the hardest hit sectors including leisure and hospitality, signaling that the job market recovery is accelerating. The headline CPI index increase by 0.4% from a month earlier and the core CPI index, which excludes volatile energy and food costs, rose by 0.1% from a month earlier and by 1.3% on a year-over-year basis. Investors worry that an expansionary fiscal policy, including President Biden’s recently approved $1.9 trillion relief package as well as the Fed’s monthly bond purchases would lead to overheating in the economy and stroke inflation.
China’s official manufacturing PMI index dropped to 50.6 in February from 51.3 in January, with export orders plunging, as factories shut down during the Chinese New Year holidays. The index has dropped to a nine-month low level and missing the median estimate of 51. China's National People's Congress (NPC) ended its annual parliamentary session on 11 March. According to Premier Li Keqiang, China will prioritize stable economic growth and the creation of new jobs as its main goals for 2021. The Chinese government set a modest growth target of “above 6%” for this year, below expectations for actual growth of over 8%.
Stocks in China slumped in the first half of March, triggered by growing concerns over liquidity tightening and possible asset bubbles. All major indexes registered losses in the first half of March, posting the worst performance during the “two sessions” events since 2009. The ChiNext Index was down 5.4%, followed by Shenzhen Component Index (-4.2%) and CSI 300 Index (-3.6%). Mutual funds gained popularity after beating market performance for a second year running and over $240 billion equity-focused products were sold in 2020. Mutual funds were hit hard in the first half of March as most funds were invested into the same handful of stocks and faced with a faster pace of declines on the way down.
The S&P 500 Index surged to an all-time high after US President Joe Biden signed the $1.9 trillion pandemic-relief bill into law with most Americans eligible to receive payments up to $1,400. All three indexes registered gains in the first half of March, with Dow Jones up 6%, S&P 500 3.5% higher and Nasdaq up 1%.
The 10-year U.S. treasury yield continues its rise in March, increasing by 20.06bps. China’s interbank rates rose in March, reinforcing expectations that liquidity tightening will continue. Major countries’ 10-year government bond yields showed mix performances. The yield curve steepened for tenors longer than 2 years in the past three months while recent excess liquidity in the short-term lending market push tenors shorter than 1 year down in the past three months.
Across the board, most major CDS and OAS indices have recovered back to pre-COVID levels as the global economy continues to recover from the pandemic. The Federal Reserve has stressed that it has no plans to taper its $120 billion monthly bond purchase program. However, volatility in the credit markets could spike should the Fed pull back on efforts to support the economy.
The dollar index rose in the first half of the month and has been rising since the start of the year as confidence in the recovery of the US economy builds up and the vaccine rollout continues. The Chinese Yuan’s appreciation against the dollar has begun to taper after a strong rally from June to December 2020 and has depreciated in March.
As vaccination continues to ramp up across countries, Brent and WTI crude oil prices continue to rise in March, increasing by 4.2% and 6.3% respectively as the demand for oil recovers and the continued commitment by producers to hold back on supply. Brent and WTI crude oil prices have hit a 12th month high, with prices recovering back to pre-COVID levels. US Natural Gas drop by 10.2% while US Gasoline rose by 7.9%. Meanwhile, Bitcoin price hits an all-time high on 13th March at US$61,078 and rose 23.5% in the month as more financial institutions begin to accept it. The rise in commodities prices have begun to taper off after the surge across the board back in February.