Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Tech Rebound, Treasury Sales, Chinese Rout Hits Copper - What's up in Markets

Published 2021-03-09, 06:42 a/m
Updated 2021-03-09, 06:43 a/m
© Reuters

© Reuters

By Geoffrey Smith 

Investing.com -- Tech stocks are set to open with a rebound after Monday’s heavy sell-off. The Treasury kicks off three days of big bond sales, and China’s stock market woes continue as the government confirms its focus on deleveraging this year. Here’s what you need to know in financial markets on Tuesday, March 9th.

1 Three days of Treasury sales  

The U.S. Treasury kicks off a three-day sale of bonds that will provide a stern test of the market’s appetite for the deluge of issuance that will be needed to fund the $1.9 trillion stimulus package.

The Treasury will auction $58 billion of three-year notes later, posting results of the sale at 1 PM ET (1800 GMT). It also intends to sell $38 billion of 10-year notes on Wednesday and $24 billion of 30-year bonds on Thursday.

Longer-dated yields have come off their recent highs smartly as foreign investors in particular have been drawn to the premiums on offer relative to other safe assets. That also drove the dollar index to a three-month high late Monday, with gains against traditional lower-yielders such as the yen and Swiss franc. However, those gains have largely unwound in European morning trading, as a measure of risk appetite returned. The dollar index was down 0.4% at 91.997.

2 Chinese rout continues despite state intervention

The heavy selling in Chinese financial markets continued, despite reported intervention by a handful of big state-backed investment funds looking to stem the rout.

The tech heavy Shanghai Shenzhen CSI 300 and Chinext indices fell 2.2% and 3.5%, taking their losses over the last month to more than 20%, amid fresh signs that the government wants to withdraw some fiscal and monetary support.

The government’s work report said that deleveraging will be one of five major tasks this year, mitigating the explosion in debt that followed the pandemic.  Overall debt has risen by 30% in the last year, according to Bank for International Settlements data, with the corporate sector alone owing over 160% of GDP – more than twice the ratio in the U.S.

The government also said last week it wanted to cut its own borrowing this year, to 3.2% of GDP from 3.6% last year.

3. Tech stocks set for rebound; OECD hikes growth outlook

U.S. stock markets are set to open higher later, with the Nasdaq set to outperform for once after again being the focus of selling on Monday.

By 6:30 AM ET (1130 GMT), Nasdaq 100 futures were up 2.4%, effectively mirroring the 2.4% drop in the Nasdaq Composite yesterday. Dow Jones futures meanwhile were extending their gains, rising 185 points, or 0.6%, while S&P 500 futures were up 1.1%.

The rotation out of tech names into value has not yet led to any overall easing of global stock valuations: the MSCI World equity index stands at 82% of world GDP, 10 percentage points above where it was in the fourth quarter of 1999, at the height of the tech bubble. However, that ratio may look better if world GDP grows this year as expected: the OECD raised its forecast for world GDP growth to 5.6% this year from 4.2% in November. The difference was largely down to the U.S. $1.9 trillion stimulus package, the think-tank said.

4. Euro recovers, helped by data, vaccine news

Europe’s economy fared slightly less badly at the end of last year than thought, according to data released on Tuesday that showed marginal upward revisions to both gross domestic product and employment.

The data were largely ignored but the euro has in any case enjoyed a bounce overnight after slumping in recent sessions due to the widening yield gap with the U.S.

On Monday, data released by the European Central Bank showed that the ECB had actually slowed its bond purchases last week, when the jitters in global bond markets drove yields higher. By 6:30 AM ET, the EUR/USD was up 0.6% at $1.1913.

Prospects for a European recovery have been helped somewhat by Germany’s announcement of plans to drastically speed up its vaccination campaign, while Italy, which blocked the export of AstraZeneca (NASDAQ:AZN) vaccines to Australia last week, will start hosting the manufacture of Russia’s Sputnik vaccine under license by a Swiss company, Prime Minister Mario Draghi said.  There was also good news on vaccines in the U.S., where the NY Post reported that the Pfizer-BioNTech vaccine is effective against the Brazilian strain of the Covid-19 virus, in addition to the U.K. and South African strains.

5 Oil resilient, copper not so much

The overnight weakness in China hit commodity prices, but crude oil shook off the weakness after the OECD's forecast, while industrial metals were left underperforming.

By 6:35 AM ET, U.S. crude futures were up 1.3% at $65.91 a barrel, while Brent crude was up 1.5%.

By contrast, copper futures again tested the $4/lb level and were still down 1.4% at $4.0370. A Reuters analysis of last month's import data showed that imports of copper and Iron ore are slowing despite a deceptively strong year-on-year comparison.

The American Petroleum Institute will release its weekly inventory data as usual later at 4:30 PM ET.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.