Chart of the Day

Fed Chair Powell spoke yesterday and delivered a dovish message which suggested the Fed will stick to its plan to keep interest rates very low. That sent bond yields rising further, with the 10-year up by 8 bp. To some extent, such a move shouldn’t be unusual - very loose policy should be associated with high bond yields, due to high inflation expectations. But the point of note yesterday was that it was real yields, not inflation expectations, rising. That could be because markets think the Fed will get behind the curve and eventually have to tighten even more than if it did so gradually.

Macro

US initial jobless claims rose to 745,000 last week, while continuing claims increased to 4.3mn in the week before.

The Challenger report showed there were 34,531 lay-offs in February, which was lower than the previous month - the 12-month average should soon start to fall.

In the UK, growth in car registrations improved in February, but was still -35.5% YoY.

Eurozone retail sales fell sharply by 5.9% MoM in January. That took the annual rate to -6.3%. Consumer confidence suggests growth should improve.

The eurozone unemployment rate was unchanged at 8.1% in January.

Markets

The S&P 500 continues to do better than the Nasdaq or Russell, but all three are still falling. The S&P 500 has now fallen by 1.6% in the past week and the Russell 2000 has fallen by 2.4%

Of the S&P 500 sectors, consumer discretionary has performed worst and energy best in the past month.

The rises in bond yields took them to the highest since early 2020.

Finally, OPEC prolonged its output cuts at its meeting yesterday, which caused a renewed rise in bond yields.

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