Macro Roundup (Feb 23)

SHANGHAI, Feb 23 (SMM) — This is a roundup of global macroeconomic news last night and what is expected today.

The U.S. dollar resumed its slide on Monday and reached multi-year lows against the British pound and the Australian dollar as traders focused on the promise of coronavirus vaccinations and the outlooks for economic growth and inflation that could push bond yields higher.

The U.S. dollar index was last down 0.3% in afternoon trading in New York at 90.046 and about even for the year. The dollar has been trending down in February and has now given up about all of its January recovery from a 2020 decline of nearly 7%.

The dollar’s latest retreat comes with spreading belief that the U.S. will go farther than necessary to support the economy with government spending and easy money policies and end up with too much inflation and too much additional debt.

Looking for any sign that the U.S. Federal Reserve might become less dovish and more mindful of inflation, markets will be watching testimony on Tuesday from Federal Reserve Chair Jerome Powell to the Senate Banking Committee.

On Wall Street, steep losses in technology shares dragged down the S&P 500 on Monday as a continuous rise in bond yields dented the appetite for growth stocks. Meanwhile, investors piled into economically sensitive names to bet on a comeback.

The broad equity benchmark lost 0.8% to 3,876.50 in volatile trading, falling for a fifth straight session amid the weakness in tech and consumer discretionary. The Nasdaq Composite fell 2.5% to 13,533.05 as Tesla shares slid 8.6%. Big Tech stocks came under pressure with Apple, Amazon and Microsoft all dropping at least 2%.

The Dow Jones Industrial Average reversed a 200-point loss to close 27.37 points higher, or 0.1%, at 31,521.69. A handful of economic comeback plays boosted the blue-chip benchmark. Disney jumped 4.4%, while industrial giant Caterpillar and chemicals company Dow Inc. both climbed more than 3.5%. American Express and Chevron gained 3.2% and 2.7%, respectively.

Oil prices gained more than 3% on Monday, driven by the expected slow return of U.S. crude output after last week’s deep freeze in Texas shut in production.

U.S. producers shut anywhere from 2 million to 4 million barrels per day of oil output due to the bad weather in Texas and other oil producing states, and the unusually cold conditions may have damaged installations that could keep output offline longer than expected.

Shale oil producers in the region could take at least two weeks to fully restart normal output, sources said, as damage assessments and power disruptions slow their recovery.

But with limited refining capacity, and the expectation that refiners, too, could take weeks to return to normal, oil prices may stumble from a lack of demand, said Bob Yawger, director of energy futures at Mizuho in New York.

Gold rose more than 1.5% to a near one-week high on Monday, as expectations for rising inflation triggered equity valuation concerns and drove investors toward the safe-haven metal, while a weaker U.S. dollar lent further support.

Spot gold was up 1.5% at $1,808.16 an ounce by 1:46 p.m. EST, after hitting its highest level since Feb. 16 in the session.

U.S. gold futures settled up 1.7% at $1,808.40.

Developments surrounding the pandemic and vaccine rollout remain in focus. The U.K. on Monday unveiled how it plans to lift lockdown measures gradually in the coming months, as its vaccination rollout maintains its good pace.

On the data front, Germany’s Ifo Institute business climate index rose in February, with sentiment in Europe’s largest economy improving by more than expected on both current conditions and expectations.