The collapse in the US stock market yesterday clearly shows that investors need one thing for a positive growth in demand for company shares – confidence that the Fed's broad promises and current stimulus for economic growth in the country will not fade on the wave of sharp inflation growth, possible changes in the Fed's monetary exchange rate, as well as the ending of all these aid packages.

On Wednesday, the local stock market was under strong pressure amid the continuation of growth in the yield of US Treasury government bonds. So, the yield of the benchmark 10-year treasuries completed the three-day consolidation period and approached the level of 1.5%. After some correction, it rose again by 0.15%, that is, to 1.472%. Its growth caused the profit-taking to continue in the US and world stock market. Such a scenario is due to the same reason – fear that the numerous support measures taken earlier and being prepared for implementation (in the amount of $ 1.9 trillion), will stimulate inflation in view of the weakening recovery of the labor market and economic activity based on the statistics published on Wednesday.

Investors are afraid that in the wake of significant government spending, inflation will rise, and the economic recovery will not be as active as previously expected. That's why the US stock indexes, and not only them, were under pressure yesterday.

So what actually happened?

The reported ADP data on the number of new jobs for February only showed a slight increase – 117,000 against the expected 177,000. In addition, the values of business activity indicators in the service sector and in the non-manufacturing sector were mixed. The PMI in the service sector rose from 58.3 points to 59.8 points last month, while in the manufacturing sector, it strongly declined to 55.5 points from the January value of 59.9 points. The figures of another important indicator of the PMI in the non-manufacturing sector also plunged to 55.3 points from 58.7 points.

The presented data clearly demonstrated the lack of a clear overall optimism in the US economic recovery, which caused the US treasury yields to rise and the stock indices to fall.

As for the currency market, the US dollar received support, albeit limited. This is because the weak labor market values were traditionally assessed by investors as a general negative background, and only the sell-off in the stock market supported it.

Analyzing the current situation, we believe that if tomorrow's official employment data turns out to be weaker than expected, and today's publication of values on unemployment benefits claims for the last week, as well as the published values of US industrial production will not impress the market, the we should expect the stock markets and demand for commodity assets to continue to fall. This negative trend is likely to support the US currency again.

Forecast of the day:

The EUR/USD pair is trading above the level of 1.2040. If it declines below it, local further decline can resume towards 1.1960.

WTI crude oil price may decline again and correct to 59.30 amid the decline in market mood if the US statistics turn out to be negative.