Stocks Rise on Powell Reassurance; Brent Tops $116: Markets Wrap
Stocks Rise on Powell Reassurance; Brent Tops $116: Markets Wrap
Zeno Markets 8
Stocks rose Thursday in the wake of reassuring comments on monetary-policy tightening from Federal Reserve Chair Jerome Powell, while crude oil extended gains sparked by Russia’s invasion of Ukraine.
Japan led a climb in an Asian share index, while Chinese technology stocks lagged. European futures slipped and U.S. contracts were steady after broad rallies lifted the S&P 500 and Nasdaq 100 on Wednesday.
Powell in testimony to U.S. lawmakers backed a measured Fed interest-rate liftoff and vigilance on inflation, while indicating the world’s biggest economy can weather higher borrowing costs.
The sanctions imposed on Russia have caused traders to back away from its resources, stoking fears of shortfalls in energy, grains and metals. Brent crude scaled $116 a barrel, and a commodity index is at a record high.
Haven demand triggered by the war moderated a little. Bonds in Australia and New Zealand retreated. Treasuries suffered sharp losses in the Wall Street session and have pared only a portion of the drop. The U.S. 10-year yield — at about 1.85% — remains below the 2% levels seen before Russia’s action. The dollar ticked higher, while gold was steady.
Powell voiced support for a quarter-point Fed rate hike later this month. He also indicated the central bank may have to take tougher action if price pressures don’t start to ease.
The Fed chair managed to “appease risk-markets by ruling out a 50 basis-points hike in March, while simultaneously promising inflation vigilance at following meetings,” Citigroup Inc. strategists William O’Donnell and Edward Acton wrote in a note.
The Fed and other key monetary authorities appear intent on pushing ahead with tighter policy, while keeping a wary eye on the Russia-Ukraine war and its possible implications for global economic momentum. The Bank of Canada on Wednesday began what’s expected to be a series of interest-rate hikes.
Fed Bank of St. Louis President James Bullard called for a “rapid withdrawal of policy accommodation,” while his Chicago counterpart Charles Evans said monetary policy is currently “wrong-footed” and needs to be upwardly adjusted toward neutrality.
Volatility
“It’s really time for investors to be prepared for more volatility, especially in the bond markets” as the Fed has yet to commence balance-sheet reduction, Nancy Davis, chief investment officer at Quadratic Capital Management LLC, said on Bloomberg Television.
The ostracism of Russia’s markets continues: MSCI Inc. is eliminating the country’s equities from the firm’s widely-tracked emerging-markets index, and Russia will be deleted from all FTSE Russell equity indexes.
Russia’s credit rating was cut six levels to junk by Fitch Ratings, which said the severity of international sanctions could undermine the nation’s capability and willingness to service debt. Moody’s also lowered its rating to junk.
What to watch this week:
- ECB publishes the account of its February meeting, Thursday
- Eurozone Markit services PMI, PPI, unemployment, Thursday
- U.S. factory orders, initial jobless claims, U.S. durable goods, Thursday
- U.S. unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were flat as of 12:31 p.m. in Tokyo. The S&P 500 rose 1.9%
- Nasdaq 100 futures lost 0.2%. The Nasdaq 100 rose 1.7%
- Japan’s Topix index rose 1.4%
- Australia’s S&P/ASX 200 index gained 0.8%
- South Korea’s Kospi index rose 1.6%
- Hong Kong’s Hang Seng index advanced 0.5%
- China’s Shanghai Composite index rose 0.1%
Currencies
- The Japanese yen was at 115.64 per dollar, down 0.1%
- The offshore yuan was at 6.3230 per dollar
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was at $1.1097, down 0.2%
Bonds
- The yield on 10-year Treasuries fell three basis points to 1.85%
- Australia’s 10-year yield rose eight basis points to 2.16%
Commodities
- West Texas Intermediate crude rose 2.4% to $113.22 a barrel
- Gold was at $1,930 an ounce, up 0.1%
