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

EconomyMar 09, 2021 06:43AM ET
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© 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.

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

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Comments (6)
Alfie Brock
Alfie Brock Mar 09, 2021 10:03AM ET
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will this turn red when they auction treasuries bonds at 1
Luke Lee
Luke Lee Mar 09, 2021 9:25AM ET
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Excellent reporting by citing a tabloid
Bulls MakeMore
Bulls MakeMore Mar 09, 2021 9:15AM ET
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Anyone notice how a great market was trashed on here with Trump....now with Biden a struggling market and not a peep, no more posts about "stonks" lol
David Ripke
David Ripke Mar 09, 2021 9:15AM ET
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We all notice it man. The ones who dont are willfully ignorant. Its crazy how many ppl have told me trump wouldnt have passed the stimulus lol
Randy Heckman
Randy Heckman Mar 09, 2021 9:15AM ET
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He would not have passed the stimulus as it is. If that was the case we would have gotten 2k checks last year. As for the bad market. Seriously no president controls the market. The market was in the one of the longest expansions that started in Obamas term. It was bound to stop eventually. It was showing signs of issues last summer.
Gene Kret
Gene Kret Mar 09, 2021 7:43AM ET
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POWW is a buy. Mucho expansion.
Buki Marovci
Buki Marovci Mar 09, 2021 6:56AM ET
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the pandemic must to finis and to come normal life
Sagor Hossain
Sagor Hossain Mar 09, 2021 6:56AM ET
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luca zanotta
luca zanotta Mar 09, 2021 6:56AM ET
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Yes please for me the same with no sugar
Mohsin Raza
Mohsin Raza Mar 09, 2021 6:55AM ET
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Sir What about gold after this $1.9 trillion stimulus package
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Bulent Ok
Bulent Ok Mar 09, 2021 6:55AM ET
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Cold has trended up again...
Bulent Ok
Bulent Ok Mar 09, 2021 6:55AM ET
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Gold 🥇
skriller bee
skriller bee Mar 09, 2021 6:55AM ET
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have to agree with you, gold's only use in market is for hedging, right now crypto/btc is doing a better job in doing that job with better returns
Jacob Steinschlag
Jacob Steinschlag Mar 09, 2021 6:55AM ET
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skriller bee  Totally agreed. But beware of the projected 70% BTC crash later this year as this is part of the normal BTC halving run vycle.
Jon Bal
Jon Bal Mar 09, 2021 6:55AM ET
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up up...money market yields are 0.01%. now quit that silly saving and spend
 
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