After a four-day rise of the dollar, the foreign exchange market began to show a correction tendency. Against the backdrop of falling oil prices, the government bonds yield declined. American Treasuries stabilized near 1.55%, which led to a slight pullback of the dollar index. At the same time, the 2-year US bonds yield is indicating an upward tendency, remaining slightly above 0.15%.
The Nasdaq 100 gained 4% amid prices leap of some of the most expensive stocks, such as Tesla Inc., which increased by 20%. The resumption of the bullish rally is based on optimism about economic growth. On Tuesday, OECD released its updated forecasts, which boosted the need for risky assets. According to the organization, the US economic recovery, boosted by President Joe Biden’s stimulus package, will help to accelerate the global economic recovery.
The global growth forecast for 2021 has been revised from 4.2% to 5.6%. For the United States, the expected figures were twice as high as in December forecasts – 6.5%. The OECD models are based on the assumption that the US government stimulus measures will increase the volume of production by about 3-4%, which will add 1% to the total world production.
But economic growth is expected to be unbalanced. OECD reduced growth estimates for European countries. For Germany, estimates of growth declined by 0.2%, for France – by 0.6%, and for Italy – by 1.0%. OECD forecasts for this and the next year assume that the economies of Italy, Spain, and the United Kingdom will not make up for GDP losses even by the end of 2022. Trade Department data that was released on Tuesday shows that Eurozone GDP decreased by 0.7% in the last three months of 2020, which is 0.1% more than it was previously calculated.
The market will now shift its focus to central banks meetings from Tokyo to Ottawa. The decision of the Bank of Canada is expected to be published today, and after that, the investors will look forward to the announcement of the results of the ECB meeting on Thursday. Against this background, volatility can gradually increase.
Main market quotes:
- S&P 500 (F) 3,871.62 -1.63 (-0.04%)
- Dow Jones 31,832.74 +30.30 (+0.10%)
- DAX 14,456.05 +18.11 (+0.13%)
- FTSE 100 6,702.04 -28.30 (-0.42%)
- USD Index 92.093 +0.129 (+0.14%)
- US Core Consumer Price Index (m/m) (Feb) at 15:30 (GMT+2);
- Bank of Canada Interest Rate Decision at 17:00 (GMT+2);
- US Crude Oil Reserves at 17:00 (GMT+2).