Macro Roundup (Mar 5)

SHANGHAI, Mar 5 (SMM) — This is a roundup of global macroeconomic news last night and what is expected today.

The dollar surged to three-month highs on Thursday after Federal Reserve Chairman Jerome Powell failed to express concern about a recent sell-off in US Treasuries as some traders had expected, resulting in higher bond yields and demand for the greenback.

Powell set aside concern that a recent move up in U.S. Treasury yields might spell trouble for the Fed as investors push up borrowing costs the central bank wants to keep low.

While Powell said the increase was “notable and caught my attention,” he did not consider it a “disorderly” move, or one that pushed long-term rates so high the Fed might have to intervene in markets more forcefully to bring them down, such as by increasing its $120 billion in monthly bond purchases.

Some investors expected Powell to “at least acknowledge that there is some concern regarding the pop in yield, which he didn’t do,” said Minh Trang, senior FX trader at Silicon Valley Bank in Santa Clara, California.

On Wall Street, stock futures fell in overnight trading Thursday following a tech-led rout on Wall Street amid a surge in bond yields.

Futures on the Dow Jones Industrial Average dipped 110 points, while S&P 500 futures slid 0.4%. The Nasdaq 100 futures fell 0.6%.

All eyes will be on February jobs report, which is set to be released Friday morning. Economists expect to see that 210,000 payrolls were added in February, compared to just 49,000 in January, according to Dow Jones.

The move in futures followed a sharp sell-off triggered by Federal Reserve Chair Jerome Powell’s remarks on rising bond yields. He said the recent runup caught his attention but he didn’t give any indication of how the central bank would rein it in. Some investors had expected the Fed chair to signal his willingness to adjust the Fed’s asset purchase program.

The economic reopening could “create some upward pressure on prices,” Powell said in a Wall Street Journal webinar Thursday. Even if the economy sees “transitory increases in inflation … I expect that we will be patient,” he added.

Oil prices jumped on Thursday after OPEC and its oil-producing allies said the group would keep production largely steady through April. Saudi Arabia also said that it would extend its one million barrels per day voluntary production cut into April.

The group approved the continuation of current production levels for April, except that Russia and Kazakhstan will be allowed to increase production by 130,000 and 20,000 barrels per day, respectively.

International benchmark Brent crude futures gained $2.68, or 4.15%, to trade at $66.73 per barrel, while U.S. West Texas Intermediate (WTI) crude futures advanced $2.49, or 4%, to trade at $63.78 per barrel.

Analysts had broadly expected OPEC+ to reverse some of the output cuts it made last year.

Crude futures have soared to pre-virus levels in recent weeks, driven higher by substantial OPEC+ production cuts and the mass rollout of Covid-19 vaccines in many high-income countries.

Gold slumped to a near nine-month low on Thursday pressured by gains in the dollar and U.S. Treasury yields after Federal Reserve Chair Jerome Powell signaled no immediate move to address the surge in bond yields.

Spot gold fell 0.9% to $1,695.26 per ounce by 2:33 p.m. EST (1933 GMT), falling below the $1,700 level for the first time since June 2020.

US gold futures settled down 0.9% at $1,700.7.

“Gold prices have once again come under pressure as real yields have spiked following the market’s disappointment over Fed Chair Powell’s comments,” said Standard Chartered analyst Suki Cooper. “Prices have dipped below $1,700/oz and are testing the next support level at $1,689/oz although gold is technically oversold.”

Key economic data slated for release today include US seasonally-adjusted nonfarm payrolls in February, US seasonally-adjusted manufacturing employment changes in February, changes in US nonfarm employment of private enterprises in February, US unemployment rate in February, US labor force participation rate in February, average hourly wage rate in February in the US and US January trade account.