Stocks erase losses as Powell restates promise - BNN

US stocks erased earlier losses and treasuries advanced after Federal Reserve Chair Jerome Powell reiterated his commitment to curb inflation during his congressional testimony, reigniting fears that the central bank’s aggressive path of interest rate hikes could tip the economy into a recession.

The S&P 500 and the tech-heavy Nasdaq 100 rose. Treasury yields declined with the 10-year yield hovering around 3.15 per cent. The dollar fell after earlier gains while other safe haven assets like gold climbed.

The S&P 500 is poised for its worst first half since Richard Nixon’s presidency as optimism evaporates that policy makers can achieve a soft landing as they navigate a course of aggressive monetary tightening to tame inflation. Powell, on Wednesday, said that the central bank will keep raising interest rates to tamp down on inflation, mostly restating his comments from a last week. He made no reference to the size of future hikes during his testimony.

“Such aggressive tightening will make a soft landing very difficult to engineer and those fears of recession or at least significantly slower growth are hitting demand for equities,” Fiona Cincotta, senior financial markets analyst at City Index, said in a note.

Bad Vintage | The S&P 500 Index is set for its worst first half since 1970
The market continues to be skeptical about the outlook for risk assets. Deutsche Bank AG’s Chief Executive Officer Christian Sewing joined a growing chorus of executives and policy makers who warn that the global economy may be headed for a recession as central banks step up efforts to curb inflation. 

West Texas Intermediate crude tumbled below US103 a barrel, with prices falling alongside other raw materials including copper. Concerns about a broad economic slowdown are eclipsing the fallout from the war in Ukraine and signs of still-tight supply. 

President Joe Biden plans call on Congress to enact a gasoline tax holiday to cool soaring pump prices and alleviate the pressure on consumers.

In Europe, stocks fell for the first day this week as miners and energy tumbled with commodity prices. 

What to watch this week:

• Fed Chair Jerome Powell semi-annual Senate testimony, Wednesday
• Powell US House testimony, Thursday
• US initial jobless claims, Thursday
• PMIs for euro zone, France, Germany, UK, Australia, Thursday
• ECB economic bulletin, Thursday
• US University of Michigan consumer sentiment, Friday
• RBA’s Lowe speaks on panel, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.2 per cent as of 10:20 a.m. New York time
• The Nasdaq 100 rose 0.7 per cent
• The Dow Jones Industrial Average was little changed
• The Stoxx Europe 600 fell 1.2 per cent
• The MSCI World index rose 1.9 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.1 per cent
• The euro rose 0.2 per cent to US1.0558
• The British pound fell 0.1 per cent to US1.2264
• The Japanese yen rose 0.4 per cent to 135.97 per dollar

Bonds

• The yield on 10-year Treasuries declined 11 basis points to 3.16 per cent
• Germany’s 10-year yield declined 15 basis points to 1.62 per cent
• Britain’s 10-year yield declined 19 basis points to 2.47 per cent

Commodities

• West Texas Intermediate crude fell 6.4 per cent to US102.48 a barrel
• Gold futures rose 0.4 per cent to US1,846 an ounce

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2022-06-22 13:48:48Z
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