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Rate Worries Sink Stocks

Fed President Jerome Powell’s reassurance about raising interest rates diminished on Thursday as bond yields rose and stock prices fell.

Wall Street soared on Wednesday as Dow set another record, incorporating Powell’s message and positive news about the Covid-19 vaccine.

But on Thursday, Wall Street fell and the Dow, S & P 500 and Nasdaq Composite were all in the red in midnight trading.

In Europe, London, Paris and Frankfurt fell below the day, and the initial rise diminished.

Earlier this week, Powell reiterated the central bank’s commitment to keeping the inflation target at 2% and keeping the financial faucet wide open until unemployment is curbed.

Optimistic views on a vaccine-led global economic recovery have skyrocketed in stocks in recent months, but imminent U.S. government stimulus boosts inflation and the Federal Reserve reverses its ultra-loose monetary policy. Concerns continue about this.

Global markets worried about rising borrowing costs, as US President Joe Biden’s $ 1.9 trillion pandemic stimulus was set for the first large-scale legislative trial voted by the U.S. House of Representatives on Friday. I feel it.

Powell addressed concerns that inflation could rise sharply, and rising prices were “unexpected and different from sustained high inflation, and if so, addressed it. There are tools to do that. “

OANDA analyst Craig Ahram said Powell’s soothing tone helped push stocks up late Wednesday, along with some positive news about the pandemic front.

“Despite Powell’s guarantee, investors are increasingly convinced that rising inflation will accelerate the tightening of central banks,” he added.

In addition to rising US Treasury yields, 10-year French government bonds have risen above zero for the first time since June 2020.

Yields on German government 10-year bonds have also risen if they remain in the negative territory.

Higher government bond yields, or investor returns, may indicate higher inflation expectations as the economy recovers from the pandemic.

“Yields have risen across the board, a sign of confidence in the global economy of a strong recovery in the post-pandemic world,” Erlam said.

“But it’s also a big headache for central banks, who are keen to stay very tolerant in the early stages of recovery,” he added.

David Madden, a market analyst at CMC Markets UK, agreed that rising government bond yields across Europe (an indicator of government borrowing costs) have raised concerns about the tightening of borrowing terms by the European Central Bank (ECB).

He recently said the ECB’s chief economist said the government was willing to buy bonds flexibly to prevent spending cuts due to rising borrowing costs.

“The problem with the ECB is that the bond market doesn’t seem to be listening,” Madden said.





Investors are worried that U.S. stimulus will cause inflation
AFP / Eva HAMBACH

Meanwhile, Powell said that while the European single currency rose against the dollar, crude oil prices temporarily peaked for 13 months due to strong demand.

Asian equities have moved forward with the latest reassurance from the Fed.

New York-Dow: 0.5% down at 31,793.93 points

EURO STOXX 50: down 0.3% to 3,694.94

London-FTSE 100: down 0.1% at 6,651.96 (closing price)

Paris-CAC 40: down 0.2% at 5,783.89 (closing price)

Frankfurt-DAX30: down 0.7% at 13,879.33 (closing price)

Tokyo-Nikkei 225: 1.7% increase 30,168.27 (closing price)

Hang Seng Index: Up 1.2% to 30,074.17 (closing price)

Shanghai-Comprehensive: 3,585.05 up 0.6% (closing price)

Euro / $: Greenwich Mean Time rises from $ 1.2166 to $ 1.2226 at $ 2,200

Pound / dollar: down from $ 1.4141 to $ 1.4128

Euro / Pound: Rise from 86.03 pence to 86.54 pence

Dollar / yen: Up 106.26 yen from 105.87 yen

Brent Crude: $ 66.93 / barrel down 0.2%

West Texas Intermediate: $ 63.35 / barrel up 0.2%



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