OECD revises up global growth forecast

• The OECD released its revised growth forecasts yesterday, outlining a much more bullish projection for the global economy in 2021 than it had held in December. The rapid rollout of vaccination programmes in some countries, alongside ongoing fiscal stimulus – most notably in the US – contributed to the upward revision from 4.2% to 5.6%. The body noted the disparity in the speed of vaccination rollouts however, revising down the growth forecasts for France and Italy, and it also urged countries against vaccine nationalism and to help support lower income countries with their programmes in the interest of the global recovery.
• The third estimate for the performance of the Eurozone economy in Q4 2020 confirmed a modest contraction as consumers endured lockdown conditions, preventing them from spending. Aggregated GDP across the bloc fell by 0.7% q/q, a drop but much more modest than the enormous decline of nearly 12% in Q2 when the Covid-19 pandemic hit. Considering much of the bloc’s economy remains under some form of lockdown condition in Q1, the Eurozone is unlikely to record growth this quarter.
• South Africa’s economy shrank by 7% in total in 2020, its worst performance in over 100 years. Performance in the final quarter of the year was positive at 6.3% growth annualized while some of the more onerous Covid-19 prevention measures were lifted at the end of February. Nevertheless, South Africa’s economy faces challenges dating back prior to the pandemic and the Reserve Bank there may actually raise rates at some point this year.
• Inflation data out of China showed a mixed picture. Producer price inflation continues its upward move, rising 1.7% y/y in February thanks to higher commodity input prices: energy and metal commodities in particular saw strong upward moves last month. However, consumer price index is heading in the opposite direction, down 0.2% y/y thanks to falling food prices.
• Dubai has announced it will extend its freeze on government service fees until 2023 in order to help support the economic recovery and maintain the competitiveness of the economy. In addition, no new fees will be imposed unless they are for vital new services, according to media reports.
• Oman will follow the UAE in offering long-term residency visas to investors and will provide lower rent and taxes in “economic diversification sectors”. The investors’ companies will need to provide more jobs to Omani citizens, however.

Today’s Economic Data and Events

11:00 TU Unemployment (Dec): Forecast 13.5%

11:45 FR Industrial production (Jan): Forecast -2.8% y/y

17:30 US CPI (Feb): Forecast 1.7% y/y

19:00 CA Rate Decision: Forecast 0.25%

Fixed Income

• It was a sea of green across bond markets overnight as the sell-off took a breather. US Treasuries, Bunds, gilts all closed higher while JGBs were only modestly lower. Yields on the UST curve were lower with the 2yr down modestly and holding onto the 0.16% handle while the 10yr fell more than 6bps to 1.5263%.
• The rise in benchmark yields is undermining the attractiveness of issuing from the region. Primary market activity has been reasonably quiet in March.

FX

• The dollar snapped its recent gains overnight as risk on attitudes took hold of the market. The broad dollar index fell 0.4% to push back below the 92 level although it is tentatively above that in early trade today.
• EURUSD was a major beneficiary even as conditions for the Eurozone economy still look poor. The single currency added almost 0.5% to settle at 1.1901. Both the JPY and GBP also rallied against the dollar, settling up 0.4% and 0.5% at 108.48 and 1.3892 respectively.
• Commodity currencies also gained with the AUD up 0.8% and NZD rallying 0.5%. The loonie will be in focus today with the Bank of Canada possibly indicating it may start to taper stimulus measures.

Equities

• The NASDAQ clawed back some of its recent losses yesterday, ending the session 3.7% higher as tech firms rebounded. It is still -2.1% lower than a week previously however. The Dow Jones and the S&P 500 also saw gains, albeit more muted at 0.1% and 1.4% respectively. The upward US growth revision by the OECD from 3.2% to 6.5% likely boosted sentiment.
• There were also gains across the board in Europe as indices reached levels last seen a year ago, with the DAX and the CAC closing up 0.4% and the UK a more muted 0.2%.
• The major outlier yesterday was the Shanghai Composite, which closed down -1.8% to the lowest level in nearly three months despite reports of domestic funds stepping in to support the index.

Commodities

• Oil prices extended losses, declining by 1.1% in Brent markets to USD 67.52/b and 1.6% in WTI to USD 64.01/b. Data from the API reported large build in US crude stocks of almost 13m bbl last week although both gasoline and distillate stocks were lower.

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