Mixed Results Despite Positive Data

Market Catch Up

• Stocks in Europe and Asia are showing mixed results, even though they hovered near a record high yesterday, supported by strong economic data from China and the United States. At the same time, currency and bond markets paused for breath after a month of rapid gains in the US Dollar and Treasury yields.

• Led by tech stocks, world equities briefly touched an all-time peak in Asia as 1% gains in Taiwan and Australia followed rises on Wall Street. Nonetheless, the CSI300 and the Nikkei traded at a loss, mostly due to profit-taking behaviour, even though Hong Kong's Hang Seng was up almost 2%.

• Stock futures were mixed, with the US500 shedding 0.2% and the DAX gaining 0.8%.

• Positive news on the US economy continue to prevail, following the excellent jobless claims report on Friday. Yesterday, the March data showed that the services PMI hit a record high, while at the same time, China's service sector has also gathered steam with the sharpest increase in sales in three months. Analysts note that this is positive for the market in general, and particularly for stocks.

• Furthermore, yields haven't moved much and so tech stocks have outperformed. The yield on benchmark 10-year US Treasuries fell 1.7 basis points to 1.6897%, an 83 basis point rise during the first quarter, the largest in twelve years.

• Some analysts believe that bonds have settled down, even though we feel that it is still too early to tell. Minutes from the March meeting of the US Federal Reserve, due on Wednesday, are the next focus for bond markets, although they will not address the most recent data surprises and markets have run far ahead of Fed projections for years of low rates.

• Fed funds futures have priced in a hike next year while eurodollar markets have it priced by December. Some analysts suggest that what investors should study is how the Fed will reinforce and reassure the public on its flexible average inflation target policy.

• In Europe, Germany's car industry picked up speed in March, a survey published by the Ifo economic institute showed on Tuesday, although automotive executives also become less optimistic about the outlook for the coming months.

Foreigners were net sellers of Asian equities for the third consecutive month in March, as higher US bond yields and a stronger dollar prompted outflows from the region.

Currencies and Commodities

• At the same time, the US dollar has mostly missed out on a big bounce from the strong data and held at $1.1810 per euro after posting its steepest drop in weeks. Even so, the Dollar Index rose by 3.6% in the quarter, the sharpest since 2018.

• Despite the yield-related gains, some analysts claim that the Dollar's past few weeks of movement reflects markets moving ahead despite what the Fed has said.

• Overall, currencies were fairly quiet through the Asia session, gaining some against the Dollar. The Australian dollar traded at $0.7647 after the central bank held policy settings steady, as expected.

• The Japanese yen was a fraction softer at 110.21 per dollar, while sterling touched a two-and-a-half week high of $1.3919.

• The dollar's wobble helped oil prices recoup some losses suffered on Monday on worries a new wave of Covid-19 infections in Europe and India can curtail energy demand. Brent crude futures rose 0.6% to $62.53 per barrel while WTI crude climbed 0.8% to $59.11 per barrel.

• Gold prices moved back up to $1,737 per ounce.

The Look-Out

• European unemployment rate and US JOLTs job openings are the major news of the day, with both expected near the previous month's levels.