• Equities kicked off March with positive tone to recover, led by tech and small caps, as bond markets cool after a volatile week
• AUDUSD slightly rises with uptrend in focus as RBA keeps its rates steady
• Job availability up and unemployment down in Japan despite emergency situation
US equities rebounded on Monday as March being kicked off, potentially restoring the sense of optimism at least for now. The bond rout last week has been cooled down a little bit and dragged major indices back from the correction territory. During the last session, S&P 500, Dow Jones and Nasdaq closed 2.38%, 1.95%, and 3.01% higher respectively, leading by tech stocks and small caps. On the other hand, VIX dropped nearly 17%. This upbeat mood, however, may have been supported by the promising data on the US manufacturing sector. National factory activity rebounded to 60.8 versus the 58.7 in January and the forecast at 58.8, marking the highest level since 2018. A reading above 50 usually indicates expansion in manufacturing, accounting for 11.9% of the US economy.
In Australia, RBA has decided to hold its monetary policy steady on Tuesday, keeping the target unchanged at 0.10%. Following the announcement, AUDUSD saw a lightly uptick but overall remains muted as the decision is in line with expectation. RBA has been quite active in keeping the rate steady, as during the bond rout it significantly increased its bond purchases.
In Japan, despite the emergency declaration, January’s job market showed much optimism. The job availability ratio rose to 1.10 from 1.05 in prior month, indicating that there were 110 openings for every 100 job seekers. Moreover, the seasonally adjusted unemployment rate fell to 2.9% versus 3.0% in prior month, a slightly better situation. However, as global markets gradually shift towards a risk-on tone, demand on JPY has the risk to be further eroded due to its status as a safe haven currency. Biden’s $1.9 trillion stimulus package will proceed to Senate this week; other positive news include falling infections and FDA’s approval on the J&J COVID vaccines. There are some sources suggesting that BoJ is ready to actively defend its government yield from going up, which may further exert pressure on the local currency.