Wall Street shares differed on Monday when traders reacted to the news that Joe Biden nominated Jay Powell as chairman of the Federal Reserve for a second term, with Lael Brainard elected as vice-chairman.
The US blue-chip S&P 500 stock index rose 0.4 percent in the New York afternoon, reaching a fresh intraday record on financial and energy stocks. In contrast, the technology-heavy Nasdaq Composite index fell 0.4 percent after rising at the open.
Technology stocks are seen as particularly sensitive to rising interest rates, with Powell’s reappointment expected to lead to a more false tilt to the US Federal Reserve’s policy than Brainard’s candidate for Fed chairman.
In sovereign debt markets, yields on the two-year Treasury note, which is sensitive to interest rate expectations, have risen to their highest level since March 2020 and last rose by 0.07 percentage points to 0.58 percent, “speaking of the hawkish implications of the nomination for 2022 in particular, ”BMO strategists noted Monday morning.
The yield on the benchmark for 10-year treasury note rose by about 0.07 percentage points to 1.62 percent. Bond yields move inversely to their prices.
Anthony Collard, head of investment for the UK and Ireland at JPMorgan Private Bank, said the prospect of a second term for Powell was “in turn positive”.
“His navigation of the crisis [while] to maintain growth, proves to us that he has done a commendable job, ”Collard said.
Stock markets were subdued across the Atlantic. European stocks rose during their afternoon session, but later fell. Several countries in the bloc were forced last week to reintroduce pandemic restrictions.
Europe’s Stoxx 600 stock index closed 0.1 percent lower on Monday, after falling 0.3 percent during the previous trading day.
Demonstrations broke out in Austria, Italy and Belgium among other European countries over the weekend, after governments sharpened coronavirus restrictions in response to larger numbers of infections.
London’s FTSE 100 stock index closed 0.4 percent higher.
Elsewhere, Asian stock markets were mixed. Hong Kong’s Hang Seng index fell 0.4 percent while China’s CSI 300 index rose 0.5 percent. Shares in emerging markets fell on Monday after selling pressure last week as investors increasingly shifted their focus to developed economies where interest rates are expected to rise in the coming year.
A broad FTSE barometer of EM stocks fell 0.9 percent in U.S. dollar terms, after falling 1.4 percent over the course of last week.
In currencies, the dollar index – which measures the dollar against six other currencies – rose 0.5 percent. The euro fell about 0.4 percent against the U.S. currency to $ 1,124, the lowest level since last summer, as traders bet the bloc’s central bank will stay with it. ultra-low borrowing costs even if US and British policymakers were expected to raise rates.
The Turkish lira hit about TL11.4 against the dollar on Monday, its weakest level ever. Last week the country’s central bank lower interest rates by 1 percentage point to 15 percent. The currency fell more than 30 percent this year as rates fell from 19 percent in early September, against a backdrop of high inflation.
Brent crude, the oil benchmark, rose to a high of $ 80.07 and last rose 1 percent to $ 79.62 a barrel.
Unsecured – Markets, finance and strong opinion
Robert Armstrong dissects the major market trends and discusses how Wall Street’s best minds react to them. Sign in here to have the newsletter sent straight to your inbox every weekday