Chart of the Day

There was relief for risk-on trades across the board yesterday as equities rebounded strongly, and those moves also benefited the emerging market currencies. After depreciating sharply in the past couple of weeks, the Brazilian real, South African rand and Turkish lira were all up by over 1% against the USD. We’ll see how those moves play out but, if the currencies come under renewed pressure, some think those central banks will need to tighten policy sooner than could be ideal in order to shore up their currencies.

Macro

US NFIB small business confidence rose by just 0.8 points to 95.8 in February. That left it below the long-run average of 97.0.

US small business price plans rose sharply again, and would normally be consistent with higher core inflation of close to 2.8%.

In February, consumer price inflation in China rose to -0.2%, while producer inflation increased to 1.7%. Producer inflation will soon rise much further due to the recent strength of commodities.

Markets

Equities rose strongly yesterday, with the S&P 500 up by 1.4% and the Nasdaq rising by 3.7%.

One potentially concerning sign for the growth outlook was that, of the S&P 500 sectors, the cyclicals like energy and financials performed worst and the tech sectors best.

The rises in the tech stocks were partly supported by a drop back in real yields.

EVs also benefited from the rapid shift in sentiment, with Tesla up nearly 20%, though that didn’t do much to reverse recent losses.

It’s a similar story for precious metals - despite gains yesterday, they all remain lower than a couple of weeks ago.

As well as the weakness of the cyclical equity sectors, another potentially concerning sign was that copper and iron ore prices dropped back.

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