China’s currency is set for its worst month against the dollar in more than a year and a half, as investors fret that a clampdown on borrowing could slow the country’s swift economic recovery from Covid-19. The tightly regulated onshore-traded renminbi fell 1.4 per cent against the greenback in March to about Rmb6.57, marking its worst one-month drop since August 2019, when Washington labelled Beijing a currency manipulator. The recent drop also erased the Chinese currency’s gains against the dollar since the new year. The fall represented a partial reversal for China’s currency after a banner 2020, when demand for the renminbi drove gains of 6.7 per cent. Offshore investors, eager to capitalise on the country’s rapid economic rebound from the coronavirus pandemic, poured more than Rmb1tn into China’s bond and stock markets. It also reflected the fact that Beijing faces a dilemma regarding whether to withdraw stimulus now that the world’s second-biggest economy has recaptured its pre-pandemic growth rate, just as the recovery elsewhere in the world begins to pick up steam. Economists said that China’s vague recently announced GDP growth target of “over 6 per cent” for 2021 was weighing on the currency. That is because it may signal authorities could be willing to clamp down on financial risk so forcefully that growth for the year could come in well below the 8.5 per cent forecast by economists polled by Bloomberg. Deliveroo, the UK’s very own labour arbitrage business, has listed on the London Stock Exchange this morning. Its debut was framed as a triumphant moment for tech stocks in London by some, with retail investors encouraged by Deliveroo’s app to get in on the action before the inevitable IPO “pop”.* Well, it hasn’t quite worked out that way. At pixel time, Deliveroo’s shares are trading at 302p -- 23 per cent below the 390p price it listed at just 27 minutes ago, according to Refinitiv data. It was down at one point almost a third. Ouch. Look on the bright side though, at least those customers who purchased shares will now know what it feels like to lose money from what seemed like a sure-fire money maker, just like its riders. A key measure of US long-term borrowing costs hit its highest level since the early days of the coronavirus crisis on Tuesday in the penultimate trading session of a brutal quarter for global government bonds. The 10-year Treasury yield rose as much as 0.06 percentage points from Monday’s closing level to touch 1.77 per cent, the highest point since January 2020, according to Bloomberg data, before rebounding to trade at 1.72 per cent. The fresh bout of volatility came as investors weighed optimism over the US’s vaccine rollout and another plan to boost fiscal stimulus. US bond markets have led a global retreat in government debt since January as investors fret that the Federal Reserve will allow the economy to run hot, with huge amounts of government spending combining with monetary stimulus to pump up inflation. Archegos Capital, a private investment firm, was behind billions of dollars worth of share sales that captivated Wall Street on Friday — a fire sale that has left traders scrambling to calculate how much more it has to offload, according to people with knowledge of the matter. The fund, which had large exposures to ViacomCBS and several Chinese technology stocks, was hit hard after shares of the US media group began to tumble on Tuesday and Wednesday. The declines prompted a margin call from one of Archegos’ prime brokers, triggering similar demands for cash from other banks, said people familiar with the matter. Traders buying the large blocks of stock were told the share sales had been prompted by a “forced deleveraging” by a fund. Archegos is a family office that manages the wealth of Bill Hwang, a “Tiger cub” alumnus of Julian Robertson’s legendary hedge fund Tiger Management. Frantic efforts are under way to unblock the Suez Canal after one of the world’s largest container ships ran aground, severing a vital trade artery and threatening to disrupt global shipments for days. The Ever Given container ship, which is almost as long as the Empire State Building is tall, is wedged across the southern end of the canal, with tug boats engaged struggling to free it. Every day, about 50 vessels sail through the 120-mile long Suez Canal. It is a key artery handling at least 10 per cent of global seaborne trade and a similar amount of oil shipments, leading to fears that a prolonged shutdown could disrupt supply chains worldwide. Taiwan-based Evergreen Marine, which operates the 220,000-tonne vessel, on Wednesday said the ship had entered the Suez Canal from the Red Sea on Tuesday and became stuck after being blown off course. Germany, France, Italy and Spain said they would resume using the Oxford/AstraZeneca coronavirus vaccine after the EU drugs regulator said there was a “clear scientific conclusion” that the jab was “safe and effective”. Emer Cooke, head of the European Medicines Agency, on Thursday said its investigation had concluded that the AstraZeneca vaccine was “not associated” with a potential risk of blood clots noted recently by some scientists, adding that the benefits of the shot outweighed possible risks. “If it were me, I would be vaccinated tomorrow,” said Cooke. EMA officials said they could not “definitively” rule out a link between the vaccine and a rarer, and more serious, type of blood clot associated with a low platelet count. “A causal link with the vaccine is not proven, but is possible and deserves further analysis,” the agency said. Cooke recommended an awareness campaign that aimed to “spot and mitigate any possible side effects” of the vaccine. Mario Draghi, prime minister of Italy, which was among the countries to suspend use of the AstraZeneca vaccine, said it would resume using the shot on Friday. Federal Reserve officials signalled that they expect to keep interest rates close to zero until at least 2024, even as they sharply upgraded their US growth forecasts because of a massive fiscal stimulus and an accelerating vaccine rollout. The Fed maintained its dovish stance at the end of a two-day meeting of its top policymakers, noting the improving outlook while cautioning that a full recovery remained distant, the path ahead was uncertain, and the economy still required ultra-easy monetary policy. “While we welcome these positive developments, no one should be complacent,” Jay Powell, the Fed chair, said during a post-meeting press conference. “At the Fed, we will continue to provide the economy the support that it needs for as long as it takes.” The upgrades to the forecasts from Fed officials were significant: whereas in December they predicted 4.2 per cent growth this year, that estimate was bumped up to 6.5 per cent, which would be the fastest economic expansion since 1984. The ferocious sell-off in US government debt markets has spilled into corporate bonds, nudging companies’ borrowing costs higher during a time when the economy is still recovering from the pandemic shock. The average yield across US investment-grade bonds hit 2.28 per cent at the end of last week, according to an index compiled by ICE Data Services, up 0.17 percentage points since the end of February and 0.5 points so far in 2021. The rise in yields, which reflects a fall in prices, marks the bonds’ worst performance since Covid-19 struck a year ago. Emerging signs of economic recovery, a quickening vaccine rollout and the recent passing of US president Joe Biden’s stimulus package have fuelled expectations of higher growth and inflation and jolted Treasury yields higher. That has eroded the value of bonds that offer fixed interest payments, especially higher quality corporate bonds that pay only a relatively small “spread” above Treasury yields. While the underlying reason for the decline in the credit market is positive, the rise in borrowing costs could counter Federal Reserve chief Jay Powell’s ambitions to keep his foot on the economic accelerator by keeping lending conditions easy. This has sharpened bond traders’ focus on the central bank’s upcoming meeting, which ends with a policy announcement on Wednesday. News Corp has struck a three-year deal to provide news to Facebook in Australia, ending a battle between two billionaire-owned empires being watched worldwide as a possible template for regulating Big Tech. The Rupert Murdoch-controlled publisher said on Monday the agreement would allow it to “provide access to trusted news and information to millions of Facebook users” in the country through the social media network’s dedicated news tab. Financial details were not disclosed. The deal includes content from The Australian newspaper, the Sydney-based Daily Telegraph and the Melbourne-based Herald Sun as well as regional publications, News Corp said in a statement. The pay television channel Sky News Australia has reached a parallel deal, it added. The agreements come after Australia last month passed a controversial law designed to force major technology platforms such as Facebook and Google to pay publishers for news content. The U.S. Treasury sold $38 billion in 10-year notes Wednesday at a high auction yield of 1.523% with solid demand for the benchmark paper following a softer-than-expected reading for February inflation. Investors bid $2.38 for every $1 on offer from the Treasury, auction data showed, modestly higher than the prior auction on February 10, when the yield was 1.155%. With around $18 trillion in global government bonds trading with a negative yield, the 1.523% yield on a risk-free 10-year attracted robust international demand, with foreign buyers taking up around 57% of the overall total, down from the six-month average of around 60.9%. The sale edged 10-year note yields modestly lower, to 1.512%, and the overall auction strength allowed U.S. stocks to hold onto previous gains, with the Dow Jones Industrial Average marked 400 points higher on the session and the S&P 500 adding 27.5 points from last night's gains. A “storm” swept through the US government bond market on Friday, sending a key measure of long-term borrowing costs to the highest level since last February. Treasuries dropped in overnight trading after a large sale of long-dated bond futures in Asia, according to people familiar with the matter. Yields on the benchmark 10-year note, a key marker across global asset markets, jumped to 1.63 per cent, having traded at about 1.53 per cent the day before, and remained around that level throughout the day. Analysts said the scale of the move underscored how jittery the $21tn market had become against the backdrop of a more robust economic rebound. Treasuries have been under pressure since the start of the year, as investors anticipate higher inflation and growth in the coming months following another enormous injection of fiscal stimulus with the passage of the Biden administration’s $1.9tn package. US stocks rallied strongly on Tuesday as big tech names such as Tesla and Apple roared higher after a sell-off the previous day. The technology-heavy Nasdaq Composite gained 3.7 per cent, a day after the benchmark slumped into correction territory. Tuesday’s rise was the index’s best one-day performance since November. Wall Street’s benchmark S&P 500 rose 1.4 per cent, giving the blue-chip index its second gain in six sessions. The US Senate has voted to approve Joe Biden’s $1.9tn stimulus legislation, taking the president’s plan to stoke America’s economic recovery a big step closer to its final passage in Congress. The upper chamber of Congress passed the fiscal stimulus legislation by 50 to 49, following party lines with all Democrats voting in favour and all Republicans present opposing. The Senate green light brings Biden’s goal of boosting the US economy with a large-scale dose of federal support during his first months in office within sight of the finishing line. Speaking from the White House, Biden described the Senate vote as a “giant step forward” for his efforts to “relieve the suffering and meet the most urgent needs” of the pandemic-battered nation. The US economy created 379,000 jobs in February, pointing to a sharp rebound in the American labour market amid a rapid decline in coronavirus cases nationwide. The increase in employment last month was more than double its pace in January, when the economy created 166,000 jobs after shedding 306,000 positions during the pandemic’s winter surge in December. However, it still leaves the world’s largest economy 9.5m jobs short of its pre-pandemic levels. The US unemployment rate edged down to 6.2 per cent. A sell-off in US government debt accelerated after the jobs report was released on Friday. The yield on 10-year Treasury bond climbed 0.05 percentage points to 1.62 per cent — its highest since February 2020 —extending losses that wracked up yesterday after Federal Reserve chairman Jay Powell failed to quell concerns about the destabilising rise in Treasury yields in recent weeks. Government bond prices sustained a further blow on Thursday, prompting benchmark stocks to wipe out close to all gains for the year, after comments from Federal Reserve chairman Jay Powell failed to reassure investors. With prices falling, the yield on the 10-year US Treasury note climbed to 1.53 per cent, up 0.05 percentage points from the previous day and continuing a sharp rise that has spread to debt issued by other nations. In stocks, the benchmark S&P 500 index extended recent losses, briefly wiping out its gains for the year with a fall of as much as 1.7 per cent. The index later clawed back some of its losses, and closed down 1.3 per cent. The technology-focused Nasdaq Composite finished 2.1 per cent lower, turning negative for the year. Investors had been waiting to see if the Fed would react to the broad sell-off in government bonds in recent weeks with a stronger message or hints of fresh intervention to calm the market. Opec and Russia decided against unleashing a flood of crude on to the market after Saudi Arabia urged fellow oil producers to “keep our powder dry” in the face of persistent uncertainty linked to the pandemic. The careful approach to April production sent oil prices up more than 5 per cent, with Brent crude above $67.30 a barrel — near the highest level since January 2020, when coronavirus had only just begun spreading across the world. Prince Abdulaziz bin Salman, the kingdom’s oil minister and son of King Salman, said on Thursday that while there was “no doubt” the market had improved since January, he wanted to “urge caution and vigilance”. “Let us be certain that the glimmer we see ahead is not the headlight of an oncoming express train,” he said, as a meeting of oil ministers began. “The right course of action now is to keep our powder dry, and to have contingencies in reserve to ensure against any unforeseen outcomes.” Donald Trump said he might run for president again, delighting his supporters at a speech to the Conservative Political Action Conference — his first public appearance since leaving the White House last month. The former president sent audience members at the Cpac event in Florida into raptures with a typically combative speech, much of which repeated material he used on the campaign stump last year. He promised not to divide the Republican party by setting up his own political movement, and suggested he could seek the party’s nomination for president again in 2024. Trump said: “Biden has failed in his number one duty as chief executive enforcing America’s laws. This alone should be reason enough for Democrats to suffer withering losses in the midterms and to lose the White House decisively four years from now.” Global stocks bounced back and government debt rallied on Monday after last week’s turbulent trading, triggered by worries over the possibility of a breakneck economic expansion and the possibility of central banks tightening monetary policies. Wall Street’s blue-chip S&P 500 index rose 2.4 per cent, its biggest one-day gain in almost nine months and enough to erase almost the entirety of last week’s declines. The technology-focused Nasdaq Composite climbed 3 per cent. Small-cap stocks advanced even further, with the Russell 2000 up 3.4 per cent — on track for its best daily performance since early January. In Europe, the region-wide Stoxx 600 closed up 1.8 per cent, while both London’s FTSE 100 and Frankfurt’s Xetra Dax indices ended the session 1.6 per cent higher. The gains for global equities came as core government debt on both sides of the Atlantic rallied. The yield on the 5-year US Treasury, which was at the centre of the market tumult last week, fell 0.03 percentage points to 0.70 per cent on Monday, while the yield on Germany’s 10-year Bund slid 0.07 percentage points to minus 0.34 per cent. There was less enthusiasm for the benchmark 10-year US Treasury note, which had rallied sharply on Friday. The yield rose 0.03 percentage points to 1.43 per cent, although well below the 12-month high of 1.61 per cent reached last week. |
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March 2021
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