Macro Roundup (Feb 25)

SHANGHAI, Feb 25 (SMM) — This is a roundup of global macroeconomic news last night and what is expected today.

The dollar struggled on Wednesday morning as dovish testimony from Fed Chair Jerome Powell bolstered concerns about rising inflation, hitting multi-year lows against the pound and commodity-linked currencies including the Canadian, Australian and New Zealand dollars.

The Federal Reserve’s Powell reiterated on Wednesday that U.S. interest rates will remain low and the Fed will keep buying bonds to support the U.S. economy. The Fed’s commitment to low rates has some investors worried that inflation could spike on passage of further fiscal stimulus.

On Wall Street, U.S. stock index futures moved higher in overnight trading on Wednesday after the Dow closed at a record level during normal trading hours.

Futures contracts tied to the Dow Jones Industrial Average gained 90 points. S&P 500 futures were up 0.23%, while Nasdaq 100 futures gained 0.18%.

The move comes after the Dow jumped 425 points to close at a record high in a volatile session that at one point saw the 30-stock average drop more than 110 points. The S&P 500 advanced 1.1%, while the Nasdaq Composite gained 1%. Earlier in the session, the tech-heavy index was down 1.3%.

Rising rates weighed on stocks early in the session as the U.S. 10-year Treasury yield topped 1.4% and hit its highest level since February 2020. Higher rates could spur investors to rotate out of stocks and into bonds. Higher rates could also hit the growth-oriented technology sector especially hard.

Oil prices climbed on Wednesday to fresh 13-month highs after U.S. government data showed a drop in crude output after a deep freeze disrupted production last week.

U.S. crude oil production dropped last week by more than 1 million barrels per day during the rare winter storm in Texas, equaling the largest weekly fall ever, the Energy Information Administration said. Refinery crude inputs dropped to the lowest since September 2008 as the freeze knocked out power to millions.

Gold pared some losses after dipping more than 1% earlier on Wednesday, helped by dovish comments from Federal Reserve Chair Jerome Powell, but bullion struggled for traction as elevated U.S. Treasury yields dampened its allure as an inflation hedge.

Spot gold was down 0.3% at $1,800.27 per ounce, after dropping as much as 1.2% earlier in the session. U.S. gold futures eased 0.3% to $1,800.

Investors kept a close watch on developments over a $1.9 trillion U.S. coronavirus relief package, which could contribute to a speedy economic recovery but at the cost of rising inflation.

On the data front, the German economy grew by more than expected in the final quarter of 2020, official figures showed Wednesday, as strong exports and construction activity supported GDP growth of 0.3%.

Key economic data slated for release today include Eurozone economic climate index and consumer confidence index for February, US first-time filings for unemployment benefits in the week ended February 20, and fourth-quarter GDP and consumer spending.