US consumers pessimistic about the outlook for the economy

The US conference board consumer confidence index fell marginally in February, declining to a value of 104.7, well below consensus expectations for a rise to 107. There was also a downward revision to the January print, which was revised to a value of 104.8 from 106.7 in the initial release. The decline in the index was entirely due to the expectations component, with respondents becoming more pessimistic about business conditions, labour markets and incomes.

New orders for durable goods in the US rose 1.4% m/m in February, above expectations for a 1.0% gain. The January print was revised downward to record a 6.9% m/m decline from an initial reading of -6.2%. The uptick in February was largely down to a rise in transport equipment orders, with civilian aircraft orders increasing sharply, meaning new durable goods orders excluding transport rose by a more muted 0.5% m/m. Core capex shipments, which is an input into the business investment component of GDP, fell 0.4% m/m pointing to relatively weak investment in Q1.

In a further blow to the global shipping industry, the Francis Scott Key Bridge in Baltimore collapsed on Tuesday, following a container ship colliding with it. Authorities have said that Baltimore port will remain closed until further notice. While the port is smaller than those on New York or New Jersey it does serve as a critical port for car imports and exports. Some vehicle manufacturers have already warned that it may cause some disruptions, while they reroute trade through other nearby ports, as well as ports on the West coast. These ports appear to still have capacity to handle the extra shipments, meaning that the impact on shipping freight costs should be fairly muted for now.

Today’s Economic Data and Events

• 14:00 EC economic confidence (Mar) forecast: 96.2
• 17:00 ZA interest rate decision forecast: 8.25%

Fixed Income

• US treasury yields declined marginally on Tuesday, with markets looking ahead to the core PCE inflation print for February, due to be released on Friday. The 2yr yield fell 3bps to 4.5910%, while the 10y yield declined by just 1bps to 4.2316%.
• Most major European yields also saw declines on the day. Both the 10yr Gilt and Bund yields fell by 2bps to reach 3.9699% and 2.349%, respectively.
• Catherine Mann, an external member of the Bank of England MPC, said on Tuesday that markets were in her view pricing in too many cuts for the UK and that the BoE was unlikely to begin cutting rates before the Fed.

FX

• The dollar gained marginally against a basket of major peers on Tuesday, recouping some of the loss seen the day before, with the spot index gaining 0.07%. Both EURUSD and GBPUSD fell 0.06% to 1.0831 and 1.2628, respectively.
• Moves against the dollar amongst commodity currencies were mixed on Tuesday. AUDUSD fell 0.11% to 0.6533, NZDUSD rose fractionally (0.02%) to 0.6004 and USDCAD fell 0.01% to reach 1.3584.

Equities

• US equities indices fell again on Tuesday. The Dow Jones declined 0.08%, the S&P 500 fell 0.28% and the NASDAQ dropped 0.42% on the day.
• European equity markets, in contrast, moved higher on Tuesday. The Euro Stoxx 50 and the CAC 40 both rose 0.4%; while the DAX gained 0.67%. The FTSE 100 rose 0.17%.
• Locally, there were falls in both the DFM (-0.82%) and the ADX (-0.12%).

Commodities

• Oil prices fell on Tuesday, following a report from the American Petroleum Institute showing a significant build in US inventories. Brent futures falling 0.58% to USD 86.25/b. and WTI declining by 0.4% to USD 81.62/b. OPEC+ is due to meet next week, with the group widely expected to leave output policy unchanged.