The U.S. stimulus package gets Senate approval; things go wild – Market Overview

By: Miguel A. Rodriguez

16:12, 08 March 2021

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As the market had already anticipated, the approval of the 1.9 trillion-dollars fiscal stimulus package in the U.S. Senate did not calm the waters.

After the aid package was approved with some amendments, the treasury market's reaction was to return to massive outflows with a rise in bond yields. Due to the increase in inflation expectations and potential upcoming rate hikes by the Fed by the end of next year, the Tnote10 was trading at 1.60%,

However, the Fed Head Jerome Powell did not show any concerns regarding any of the latest developments, leading to speculation among analysts that the Central Bank could be behind everything.

Elsewhere in Asia

New statements issued by the Chinese authorities regarding a potential withdrawal of the stimuli deployed to counteract the pandemic crisis's effects made analysts think about a possible credit bubble.

The Chinese stock index Hang Seng was sent plummeting during the Asian session, closing near the main support level located in the 28200 area, below which a downward trend would begin.

U.S. Indices not in a good spot.

The same movement has been reflected in the North American futures that started the week in the red.

The Tech100 index lost 1.70% in the early hours of the morning. From a technical perspective, after breaking down an H.S. formation and making a corrective pull-back movement towards the neckline located at 12691, resumed the bearish trend with a theoretical objective in the area of ​​11.468.

Inflation reports still to come.

All eyes will be on the inflation figures of the States that will be published this week. Any unexpected rebound could mean a worsening of the risk sentiment, putting additional pressure on bond yields.

In this scenario of greater risk aversion, the U.S. Dollar, unlike on previous occasions, strengthened due to its positive correlation with long-term interest rates. In its price against the euro and from a technical point of view, the Dollar is heading towards the price zone located around 1.1770-1.1800, not seen since last November.

Sources: WSJ, Financial Times.

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