What Fed Chair Powell did not say that shook up the markets.
Wall Street turned sharply lower following Fed Chair Powell’s remarks, even though it was not what he said but what he did not mention that undermined equity sentiment. Specifically, he did not push back against the recent surge in Treasury rates. Indeed, he took attention of the spike and would be concerned by a “disorderly” move, providing tacit approval for the run-up in longer dated yields. Consequently, the stock market was dragged lower once again thanks to rising rates and expectations for more of the same as the economy and inflation pick-up further.
Headlines:
- The Chair’s comments that he took attention of the spike and would be concerned by a “disorderly” move were not in the market’s narrative.
- Fed Chair Powell’s perceived benign neglect of the surge in bond yields weighed on Treasuries and extended the recent selloff back toward the highs from February 25.
- The US 10-year rate corrected slightly overnight but remains at 1.56%. The 10-year rate is currently down -5.3 bp at 0.079%, while yields jumped 6.0 bp and 7.5 bp in Australia and New Zealand respectively.
- The tech-heavy USA100 over -3% lower intraday, with spill over to the broader indexes. However, the losses were pared in late trading with closing declines of -2.11% on the USA100, -1.34% on the USA500, and-1.11% on the USA30. JPN225 and ASX were still down -0.2% and -0.7% respectively at the close.
- BoJ’s Kuroda sees no need to widen yield band. He said there is no need to widen the implicit band set for its long term yield target, while stressing the need to keep borrowing costs low to support the economy.
- Oil prices jumped higher after the OPEC+ meeting decided to maintain current output levels. The USOIL is currently trading at USD 64.60 per barrel.
- In Europe, key central bankers have also played down the rise in rates and signalled that the central bank won’t add additional measures next week that would reverse the rise in rates. Verbal intervention and a flexible use of PEPP purchases will likely be used to smooth an uptrend that most central bankers seem to feel is essentially justified, given the improved outlook for growth later in the year.
- German manufacturing orders rose 1.4% m/m in January, more than anticipated
Forex Market
JPY – USD rallies again – USDJPY over 108.00
EUR –dropped against a largely stronger Dollar- Currently at 1.1947
GBP – at 1.3859
AUD – dipped below 50-DMA again, at 0.7686
CAD –steadied to 1.2660 after 1.2574 bottom
GOLD – breaks the $1,700 – trades on 1695 now
USOil – Oil rocketed following OPEC+ agreeing to no production increase and to keeping current levels for at least April. USOil at 64.60 up from 59.20 lows on Wednesday
Bitcoin – returns to 47K
Today: Attention will turn to the US February employment report, hourly earnings, unemployment rate, January trade report and consumer credit is due late in the session, seen rising $10.0 bln from $9.7 bln previously. Canadian Ivey Purchasing Index in the tap as well.
Biggest mover – NZDUSD (+0.45% as of 07:30 GMT)
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Andria Pichidi
Market Analyst
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