Dollar, Bond Yields and Commodity Prices Up and Another Momentum Shift in Equities – Currency Thoughts

Dollar, Bond Yields and Commodity Prices Up and Another Momentum Shift in Equities

March 5, 2026

As has often been the case during the Iran war, there has been other equity market reversal between Asia’s and Europe’s trading day. Stock market indices rebounded 9.6% in South Korea, 2.6% in Taiwan, 1.9% in Japan, 1.8% in Indonesia, 1.1% in India, 0.9% in Malaysia and 0.6% in China. However, markets in Germany, Italy, France and the U.K. are somewhat lower, and U.S. stock futures fallen even more sharply.

Ten-year sovereign debt yields this Thursday have so far risen nine basis points in Italy, eight bps in Spain, seven bps in the U.K., Germany, Switzerland and France, four basis points in Japan, and three basis points in the United States.

West Texas Intermediate oil, currently hovering around $77 per barrel, is around 3% stronger than at yesterday’s close. Silver and gold prices have climbed 0.8% and 0.6%, respectively, while Bitcoin merely marked time.

Dollar gains today have been led by a 0.9% advance against the Korean won and included upticks of 0.4% versus the Australian dollar, 0.3% relative to the yen and kiwi, 0.2% versus the euro and peso and 0.1% against sterling.

There’s been no let up in the Middle East war. The United States has taken credit for a submarine having sunk an Iranian warship, the first time that’s been done since the Second World War. The rumor won’t quit that Iranian leadership, such as it is, has been attempting to resume back-channel negotiations to strike a ceasefire. But like Putin vis-a-vis Ukraine, why would President Trump find a halt to the fighting appealing when he believes that time is on his side in the quest for complete victory?

What hasn’t stopped is the flow of economic data that literally never ends. The Italian, British and German construction sector purchasing manager indices of 50.4, 44.5 and 43.7 slipped back to 4-, 2- and 2-month lows, while the French and full-euro area PMI readings for that sector increased in February to respective 6- and 2-month highs of 43.9 and 46.0. Only Italy’s index was above the 50 level that divides positive from negative growth, and Italy’s case reflects stagnation more than expansion.

Retail sales volume in the euro area had been projected to rise slightly in January but instead dipped 0.1% on month while exceeding the year-earlier level by 2.0%. January sales were unchanged from the prior quarter’s average level. Sales in January recorded monthly declines in Slovakia, Croatia, Germany and Hungary but rose in France, Italy, Spain and Latvia.

A 3.8% quarterly plunge in Irish GDP in the final quadrant of 2025 was the sharpest drop in 22 quarters, but GDP in full-2025 still climbed by a masterful 12.3% despite seeing its current account surplus narrow 43% to EUR 51 billion. Iceland’s current account deficit likewise deepened 20% last year. Austrian GDP flat-lined in the final quarter of 2025 and posted year-on-year growth of 0.6% both that quarter and in 2025 as a whole.

French industrial production in January reversed December’s 0.5% decline and also posted a 2.4% advance from the year-earlier month. Spanish industrial production in January (-0.4% on month and +0.2% on year) underperformed expectations.

Positive elements of the current U.S. economy were accentuated in today’s data release menu of productivity, unit labor costs, jobless insurance claims and import and export prices.

• U.S. non-farm labor productivity, a major driver to long-term economic growth, continued to sizzle last quarter, climbing 2.8% both from the prior quarter and in year-on-year terms. Over the  past three years, productivity advanced 2.0% in 2023, 3.0% in 2024 and 2.2% last year.
• Unit labor costs returned to positive territory and more sharply than had been projected, jumping 2.8% in 4Q after annualized drops of 1.8% in 3Q and 2.9% in 2Q. But the average 1.9% increase in unit labor costs in 2025 as a whole was less than 2.4% in 2024 and 2.0% in 2023.
• Jobless insurance claims last week of 213k matched the prior week’s total and trimmed the 4-week average to is lowest level since January’s final week. The U.S. Challenger estimate of job cuts in February was only 48k, 55% fewer than in January.
• Import prices went up just 0.2% in January and were 0.1% lower than a year earlier. However, that benign move was driven by a 2.2% drop in the price of import fuel (-13.6% versus January 2025), and that is about to reverse very sharply with the closure of the Strait of Hormuz and aerial bombing of energy installations throughout the Middle East. Non-fuel import price growth accelerated to 0.5% on month in January from 0.2% in December and zero percent last September.

A more worrisome tone was struck in the latest Federal Reserve Beige Book, released yesterday afternoon. Five of the 12 Federal Reserve Districts (to wit, those centered in New York, Minneapolis, Boston, San Francisco, and St. Louis) reported that economic activity since just before the last FOMC meeting had either deteriorated slightly or been flat.

February consumer price inflation in February climbed to a 13-month high of 2.4% in the Philippines, matched January’s 3-month high of 0.5% in Sweden, and slowed to a 2-month low of a mere 0.1% in Cyprus.

The Central Bank of Malaysia’s overnight policy interest rate was left unchanged at 2.75% as markets had been expecting. Ever since a 25-basis point cut last July, it’s been at the lowest level since April 2023. Officials noted that “core inflation in 2026 is expected to remain stable and close to its long-term average, reflecting continued expansion in economic activity and the absence of excessive demand pressures.” Regarding uncertainties related to the Middle Eastern war, officials expressed optimism that “the Malaysian economy is facing these challenges from a position of strength, with robust domestic growth, moderate inflation, sound financial sector and resilient external position.”

Copyright 2026, Larry Greenberg. All rights reserved.

Tags: Beige Book, Central Bank of Malaysia, Euroland and British construction purchasing manager surveys, Euroland retail sales

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on Thursday, March 5th, 2026 at 7:57 am and is filed under New Overnight Developments Abroad – Daily Update.
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