Ten-Year U.S. Treasury Stays Firm but Dollar and Equity Moves Have Been Muted

March 15, 2021

The ten-year U.S. Treasury yield is unchanged on balance at 1.62% after touching a 13-month high of 1.635%. The price of a Bitcoin moved briefly above $60,000 but also has settled back. The dollar has risen 0.5% against the Aussie dollar and 0.3% relative to the euro but only 0.1% against the yen, sterling, and on a trade-weighted index. The greenback has slipped 0.2% versus the peso and kiwi and 0.1% vis-a-vis the yuan and shows no net movement against the Canadian dollar. The coming week features an FOMC meeting with updated macroeconomic forecasts on Tuesday and Wednesday.

U.S. equity futures had been up but are now little changed. Share prices rose 1.5% in New Zealand but closed down 1.0% in China, 0.7% in India and 0.5% in Indonesia. European stock markets are marginally up in Germany, France and the U.K. and a bit more significantly in Italy and Spain. The 10-year British gilt yield has climbed 3 basis points, while its German and Japanese counterparts are respectively flat and down one basis point. Gold‘s price has advanced 0.5%, while WTI oil has dipped 0.1%.

On the data front, China reported January-February retail sales and industrial production. Because of the Lunar New Year distortion, it is that country’s practice to lump the two months together.

  • On-year advances of 33.8% in sales and 35.1% in production each beat market expectations slightly. Huge gains were inevitable when compared to a year earlier which was the severest period of covid restrictions, and government officials downplayed the results, asserting that economic activity is still contending with pandemic headwind and has been uneven in composition.
  • China also reported a 0.3 percentage point rise in unemployment to a 5-month high and a smaller-than-forecast 35% on-year increase in fixed asset investment. In January-February of 2020, investment had plunged 24.5% from a year earlier.
  • On a brighter note, Chinese house prices increased 0.4% on month in February and posted the largest on-year advance (4.3%) since October.

Japan’s monthly tertiary index of service sector activity kicked off 2021 on a weak footing, dropping 1.7% in January following monthly declines of 0.3% in December and 0.7% in November. The 12-month rate of decrease in the tertiary index swelled 2.5 percentage points to 6.1% but was still less than the average drop of 6.9% in full-2020.

Another Japanese data disappointment today was the 4.5% monthly decline of domestic private core machinery orders in January, which broke a streak of three straight increases. Such orders were just 1.5% higher than in January 2020 and accompanied by a 27.9% plunge in orders from the public sector. Export orders increased 6.4%.

Several economies reported price data, which analysts continue to comb for confirmation of the broad expectation that pricing pressure is likely to accelerate quite significantly in the short run as Covid restrictions relax.

  • German wholesale prices leaped 1.4% in February, resulting in a 26-month on-year advance of 2.3%. The on-year comparison had been zero percent in January, breaking a streak of eleven negative figures in a row.
  • Indian WPI inflation roughly doubled to a 27-month high of 4.17% in February from 2.03% in January, with accelerations in fuel, food, and manufacturing prices.
  • Czech producer price inflation of 1.4% in February followed 0.0% in each of the two prior months and was the highest in a year.
  • But Danish PPI deflation plumbed deeper to -3.0% in January after -1.3% in December. This was the fifth straight negative result in a row.
  • Swedish CPI inflation decelerated 0.2 percentage points to 1.4% in February.
  • Finnish CPI inflation held steady last month at 0.9%, a one-year high.
  • And Saudi Arabian CPI inflation receded a half-percentage point to an 8-month low of 5.2%.

New home sales in Australia last month rebounded 22.9% from a 69.4% plunge in January. Such had advanced 32.5% in all of 2020.

The New Zealand purchasing managers index of service sector businesses for a fourth consecutive month printed below the 50 level separating improving from weakening conditions, but at 49.1, the rate of contraction slowed.

Britain’s Rightmove house price index posted the smallest year-on-year increase this month (2.7%) since the second quarter of 2020.

A 9.0% on-year drop in Czech retail sales in January was the biggest slide in 8 months.

The New York Fed’s Empire State Manufacturing Index rose more than expected in March to an 8-month high of 17.4 after printing at 12.1 in February.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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