Daily Comments

The China February Markit PMI weakened to 51.5 (still showing expansion). Asia markets were higher. The Nikkei 225 was up +0.51% and the Shanghai Composite jumped +1.95%. European markets were stronger. The DAX gained +0.29%. 10-year bunds yield -0.295%. For 02/27, the MBA Mortgage Apps Index bounced back +0.5% and EIA Crude Inventories were 21.6M. The Feb. ADP Employment Report only showed a gain of +117K vs. estimates of 165K. The PMI Composite printed at 59.5 vs. 58.8 consensus, and Services were 59.8 vs. estimates of 58.9). The ISM Services declined to a 9-mo low of 55.3 vs. consensus est. of 58.7. The Fed’s Beige Book for Feb. noted businesses were optimistic, but the rate of economic improvement is slowing. 10-Year Notes yield 1.470%. The March US$ Index gained +0.17% to 90.950. April gold sank -1.19% to $1,712. There are expectations that OPEC may not increase output after this week’s meeting, and oil prices moved up, with April crude jumping +2.44% at $61.21. TX lifted covid-19 restrictions to operate at full capacity. The Senate is debating the $1.9BT stimulus package. The ES had been positive early, but 10yr rates moved higher, and stocks sank.

Asia markets were mostly lower with no follow through from Monday’s gains. The Nikkei 225 fell -0.86% and the Shanghai Composite dropped -1.21%. European markets were generally stronger. The DAX ticked up +0.19%. 10-year bunds now yield -0.353%. February Motor Vehicle Sales are expected at 16.4M annual pace compared to 16.6M last year. Hyundai reported a -9% decline. 10-Year Notes yield 1.412%, after last week spiking up to 1.60%. The March US$ Index was off -0.27% to 90.780. April gold gained strength during the session, closing up +0.56% at $1,732. April crude oil initially rallied but faded later on, ending lower by -1.67% at $59.63. Redbook Research notes that their weekly measure of comparable retail store sales came in at 4.6% YoY compared to the last reading of 2.9%. In the overnight session the ES was lower, perhaps on the heels of China’s top banking regulator saying he was “very worried” about bubbles in global financial markets and their risks. Fed Gov. Brainard said they were closely watching bond volatility. Yields backed off afterwards, but the ES faded and closed firmly in the red.

China manufacturing PMI for February came in at 50.6, a 9-mo low, and below the reading for January. Asia markets reversed direction again, this time closing broadly higher. The Nikkei 225 jumped back +2.41% and the Shanghai Composite added +1.21%. European markets strengthened. The DAX gained +1.11%. 10-year bunds yield -0.327%. The February Markit Manufacturing PMI fell to 58.6 and the ISM Manufacturing Index hit its highest level since 2014, at 58.9. 10-Year Note yield fell from its perch, retreating to 1.33333%. The March US$ Index gained +0.20% to 91.065. April gold slipped -0.50% to $1,720.40. April crude fell -2.02% to $60.26. As expected, the House passed a $1.9T fiscal stimulus measure, but now it faces the Senate. J&J’s new one-shot covid-19 vaccine has now been given the green light by the FDA as well as the CDC. However, the bigger theme today seemed to be Treasury yields have retreated and alongside that, stock prices subsequently rallied sharply from last week’s selloff. Overnight the ES was about 40 points stronger, and as the regular session got underway, prices only continued to strengthen, with strong gains in all major indices.