Market sentiment was cautiously pessimistic this past week, with the Dow Jones[1], S&P 500[2] and Nasdaq[3] Composite all closing in the red. European equities were a mixed bag. In Germany, the DAX 30[4] gained over 0.8% as the FTSE 100[5] sank a roughly equivalent amount. In the Asia Pacific region, the Nikkei 225[6] gained 0.25% as Australia’s ASX 200[7] weakened almost 0.9%.
All eyes were on the Fed, which continued to remain fairly sanguine about longer-term Treasury rates. The 10-year yield gained about 6.5% this past week, rising to 1.73% as it touched late January 2020 highs. Rising yields in the United States continued to support the US Dollar[8] as it outperformed the British Pound[9], Euro[10] and Australian Dollar[11].
Crude oil prices[12] sank as vaccine rollout woes in Europe and a reintroduction of lockdowns in parts of France hindered demand prospects. In fact, it was the worst week for WTI since late October. Gold prices[13] were slightly higher, but rising government bond rates deprived XAU/USD[14] from its upside potential.
The week ahead notably dims down in terms of economic event risk. Fed Chair Jerome Powell and Treasury Secretary Janet Yellen will be testifying before the Senate Banking Committee. Further restraint about the bond market could offer the green light for yields to continue climbing, with eyes on the central bank’s preferred measure of inflation, or Core PCE on Friday.
Speaking of central banks, the Swiss National Bank is on tap for the CHF[15]. Rising external rates may leave the currency vulnerable in the long run
