Macro Roundup (Jan 13)

SHANGHAI, Jan 13 (SMM) — This is a roundup of global macroeconomic news last night and what is expected today.

The US dollar edged lower against a basket of currencies on Tuesday, as its recent rally, driven by a spike in US Treasury yields, appeared to run out of steam.

The dollar had hit a more than 2-1/2-year low in January after sliding for months as the US Federal Reserves’ interest rate cuts and strong investor demand for riskier assets has sapped demand for the safe-haven US currency.

Expectations for a wave of spending under an incoming Joe Biden administration have pushed Treasury yields higher, with the 10-year yield reaching a 10-month high on Tuesday.

The dollar index, which measures the greenback against a basket of currencies, was 0.11% lower at 90.38. The index, which fell as low as 89.206 last week, has climbed 1.5% since then.

On Wall Street, US stock index futures were little changed in overnight trading on Tuesday, after a session that saw stocks alternate between gains and losses.

Futures contracts tied to the Dow Jones Industrial Average slid 20 points. S&P 500 futures and Nasdaq 100 futures were flat.

Stocks closed little changed on Tuesday as traders digested higher rates, possible additional stimulus measures and political turmoil.

The Dow Jones Industrial Average rose 60 points, or 0.2%, to 31,068.69. The Nasdaq Composite ended the day up 0.3% and the S&P 500 rose slightly to 3,801.19. Meanwhile, the yield on the benchmark 10-year Treasury briefly traded at 1.18%, its highest level since March.

Given the rise, Credit Suisse recommended that investors favor pro-cyclical sectors, including financials and energy. Rising rates could hurt growth stocks, however, and a number of tech heavyweights including Facebook and Apple declined during Tuesday’s session.

Expectations for additional fiscal stimulus is one of the reasons behind the steady move higher in yields. President-elect Joe Biden is expected to release details on his economic plan on Thursday.

Oil hit an 11-month high towards $57 a barrel on Tuesday as tighter supply and expectations of a drop in U.S. inventories offset concerns over climbing coronavirus cases globally.

Saudi Arabia plans to cut output by an extra 1 million barrels per day (bpd) in February and March to stop inventories from building up. The latest U.S. supply reports are expected to show crude stocks fell for a fifth straight week.

Brent crude was 80 cents, or 1.4%, higher at $56.44 a barrel and earlier hit $56.75, the highest since last February. U.S. West Texas Intermediate (WTI) settled 1.8%, or 96 cents, higher at $53.21 per barrel.

“Saudi Arabia in particular is ensuring through its additional voluntary production cuts that the market is undersupplied if anything,” said Eugen Weinberg of Commerzbank.

Gold prices edged higher in a choppy trading on Tuesday as the U.S. dollar and Treasury yields eased, while prospects of higher inflation driven by more U.S. fiscal stimulus provided further support to the metal.

Spot gold was up 0.2% at $1,848.31 per ounce. On Monday, prices touched their lowest level since Dec. 2. U.S. gold futures settled 0.4% lower at $1,844.20.

“Investors’ willingness to buy U.S. debt boosted confidence in U.S. assets as stocks rallied and the dollar slipped, both of which helped gold rally a bit,” said Tai Wong, head of base and precious metals derivatives trading at BMO.

The dollar index slipped 0.3% against its rivals, while 10-year U.S. treasury yields fell to a session low of 1.146% after a strong 10-year auction.

“There’s going to be a big stimulus package that should be supportive for the gold market, it can not only stimulate demand but also prompt ideas of some problematic price inflation,” said Kitco Metals senior analyst Jim Wyckoff.

US Seasonally-unadjusted CPI annual rate in December and US EIA Weekly Crude Oil Stock Change as of January 8 will be released today.