Higher yields globally see stocks dip, US Dollar weakness resumes

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Published Feb 22, 2021

• Another relatively quiet week for financial markets, with the main central bank activity from the Reserve Bank of Australia (RBA) and the Federal Open Market Committee (FOMC) releasing their prior Meeting Minutes, with minimal impact on markets.
• Macroeconomic data releases were on the lighter side with the global Markit Flash Manufacturing and Services PMI releases on Friday also failing to ignite financial markets.
• Earnings season is coming to an end with Walmart the standout in the past week, missing expectations.
• President Biden’s COVID relief bill saw some progress late last week with the full text of the bill released and Treasury Secretary Yellen calling for lawmakers to pass an aggressive package.
• The anticipation of a more aggressive COVID relief bill has resumed the belief in the reflation trade, plus possibly allowing for the Fed to step away from their ultra-dovish position.
• These developments had the most impact on an already bearish bond markets, with US and global yields surging to multi-month highs.
• However, equity markets have signalled concerns over the possibility of higher yields and maybe a sooner than expected tapering and move to higher interest rates.

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