【TOP1 Morning】Gold rebounds 2% as dollar, U.S. yields pull back, Oil slips below $68

Yesterday Market Review

Gold

Gold rose nearly 2% on Tuesday, as it gained respite from a retreat in U.S. Treasury yields and the dollar following a slide to a nine-month low in the last session.

The spot gold closed at $1715.26 per ounce; the volatility within the day is $1680.00-$1720.45.

The silver closed at $25.904; the volatility within the day is $25.017-$26.117.

“Given the metal’s zero-yielding nature, falling yields may provide a tailwind for bulls to elevate prices higher,” said Lukman Otunuga, senior research analyst at FXTM.

But while gold may extend gains near term, “fundamentally, the pendulum swings in favour of bears especially when factoring in how global sentiment is improving on vaccine rollouts and COVID-19 cases are falling globally.”

U.S. 10-year Treasury yields eased, and the dollar slipped against rival currencies.

Gold is also being propped up by some bargain hunting, said StoneX analyst Rhona O’Connell.

But there’s a split, as “some people think the bond market has got a long way further to go downwards, (while) other people are saying that because of the distribution of positioning, some managers may be starting to look at rebalancing.”

Gold’s current move “is a short-term bounce and not a reversal of the bigger trend,” said analyst Xiao Fu at Bank of China International.

The exchange-traded fund outflows are indicating diminishing investor interest, she added.

Forex

The dollar on Tuesday backed off its 3-1/2-month high as U.S. Treasury yields stabilized ahead of key inflation data and Treasury auctions this week, boosting riskier currencies such as the pound, Australian dollar and Kiwi dollar.

The U.S. dollar index closed at 92.00; the volatility within the day is 91.92-92.53.

On Monday, Yellen said Biden’s aid package would fuel a “very strong” U.S. economic recovery, and that there are tools to deal with inflation if the economy runs too hot.

But some market participants were wary yields could rise further this week as the market digests a $120 billion auction of 3-, 10-, and 30-year Treasuries, especially after last week’s soft auction and a 7-year note sale that saw a spike in yields.

Commodity-linked currencies benefited from the pull-back in yields, with the Australian dollar gaining 0.9% to $0.7718 and New Zealand dollar gaining 0.65% to $0.7174.

The euro rose 0.47% to $1.19035 and sterling gained 0.58% to $1.3901.

Crude Oil

Oil fell to around $68 a barrel on Tuesday in a choppy session, pressured as concerns faded of a supply disruption in Saudi Arabia, which countered a pause in the dollar’s rally and prospects for tighter supply due to OPEC+ output curbs.

West Texas Intermediate crude settled at $63.759, the volatility within the day is $63.616-$65.888. International benchmark Brent crude closed at $66.934, the volatility within the day is $66.892-$69.064.

On Monday, crude hit its highest level since the start of the coronavirus pandemic, a day after Yemen’s Houthi forces fired drones and missiles at Saudi oil sites. Saudi Arabia said it thwarted the strike, however, and prices slipped as supply fears eased.

In a monthly report, the EIA said it now expects U.S. crude oil production to decline by 160,000 barrels per day (bpd) in 2021 to 11.15 million bpd, a smaller decline than its previous forecast of a 290,000-bpd drop.

Stocks

U.S. stocks rose on Tuesday after a decline in bond yields caused investors to rotate back into the beaten-up technology sector.

The Nasdaq Composite climbed 3.69% to 13,073.82 for its best day since November. Tesla soared 19.6% after a five-day losing streak and posted its biggest one-day pop since February 2020. Apple and Facebook jumped more than 4% each, while Microsoft and Netflix both gained at least 2.5%. Amazon rose 3.8%. The tech-heavy benchmark rallied as much as 4.3% during the session.

The S&P 500 advanced 1.4% to 3,875.44. The Dow Jones Industrial Average closed the day near its session low, rising just 30.30 points, or 0.1%, to 31,832.74. At its session high, the blue-chip benchmark jumped more than 300 points to touch an intraday record high.

Technology shares rebounded from steep losses as bond yields stabilized. 

Apple (AAPL-US) rose 4.06%; Facebook (FB-US) rose 4.09%; Alphabet (GOOGL-US) rose 1.64%; Amazon (AMZN-US) rose 3.76%; Microsoft (MSFT-US) rose 2.81% .

U.S. tech stocks jumped Tuesday after bond yields declined, helping to drive Tesla up almost 20%, nearly wiping out five straight days of selling. However, Tesla is still down about 25% from its all-time intraday high of $900 per share on January 25.

Sales data published by the China Passenger Car Association also helped buoy Tesla’s share price. CPCA reported Tuesday that retail sales of passenger cars in February 2021 in China more than quadrupled to around 1.2 million vehicles compared with February 2020 numbers.

“A lot of these tech stocks have become oversold on a short-term basis. Therefore, it’s not a big surprise that they’re seeing a nice bounce,” said Matt Maley, chief market strategist at Miller Tabak. “The question will be whether this bounce is a strong one...or a ‘dead cat bounce’ that doesn’t last very long at all.”

Widely followed investor Cathie Wood of Ark Investment Management told CNBC on Monday that the recent tech sell-off created “great opportunities” for her to buy the pure play names in her funds, which are concentrated in disruptive technology stocks.

Meanwhile, the rally in reopening plays and cyclical stocks took a breather on Tuesday. Energy was the biggest loser with a 1.9% decline, paring its March gains to about 8%. Financials and industrials also underperformed Tuesday.

Focus Today

21:30(GMT+8): United States Core Inflation Rate YoY (FEB), Forecast: 1.4%, Previous: 1.4%;

23:00(GMT+8): Canada BoC Interest Rate Decision, Forecast: 0.25%, Previous: 0.25%;

23:30(GMT+8): United States EIA Cushing Crude Oil Stocks Change (05/MAR), Previous: 0.485M;