Wall Street shares fell on Monday as traders reacted to news that Joe Biden had appointed Jay Powell as Federal Reserve chairman for a second term, with Lael Brainard selected as running mate.
The blue-chip US S&P 500 stock index lost its earlier gains when Powell’s appointment was first announced, ending the day 0.3% lower in New York City. The tech-rich Nasdaq Composite Index also fell at the end of the trading day, closing down 1.3%.
Tech stocks are seen as particularly sensitive to rising interest rates, with Powell’s re-appointment likely to result in a more hawkish tilt in US central bank policy than if Brainard had been chosen as the Fed’s presidential candidate.
In government debt markets, the yield on the two-year Treasury bill, which is sensitive to interest rate expectations, reached its highest level since March 2020, up 0.09 percentage point to 0 , 59%, “speaking of the hawkish implications of the appointment for 2022 in particular,” BMO strategists noted Monday morning.
The benchmark 10-year Treasury bill yield increased by around 0.08 percentage point to 1.62%. Bond yields move in the opposite direction to their prices.
Anthony Collard, head of investments for UK and Ireland at JPMorgan Private Bank, said the prospect of a second term for Powell was “overall positive”.
“His navigation of the crisis [while] the continued growth proves to us that he has done a commendable job, ”said Collard.
Equity markets were gloomy across the Atlantic. European stocks had risen slightly during their afternoon session, but then fell. Several countries in the bloc were forced last week to reimpose pandemic restrictions.
The European Stoxx 600 stock index closed 0.1% lower on Monday, after falling 0.3% on the previous trading day.
Protests erupted in Austria, Italy and Belgium among other European countries over the weekend, after governments stepped up restrictions on coronaviruses in response to a higher number of infections.
London’s FTSE 100 stock index closed 0.4% higher.
Elsewhere, Asian stock markets have been mixed. Hong Kong’s Hang Seng index fell 0.4% while China’s CSI 300 index rose 0.5%. Emerging market equities as a whole were down on Monday following selling pressure last week as investors increasingly focused their attention on developed economies where interest rates are expected to rise over the last week. year to come.
A broad FTSE barometer of emerging markets equities fell 0.9% in US dollars, after falling 1.4% in the past week.
In foreign currencies, the US dollar index – measuring the greenback against six other currencies – rose 0.5%. The euro weakened by about 0.5% against the US currency to $ 1.124, its lowest level since the summer of last year, with traders betting the bloc’s central bank to pull away. would hold onto ultra-low borrowing costs even as US and UK policymakers were to raise rates.
The Turkish lira hit around 11.4 TL to the US dollar on Monday, its lowest level on record. Last week, the country’s central bank cut interest rates by 1 percentage point to 15%. The currency has fallen more than 30% this year, as rates were cut by 19% in early September, amid high inflation.
Brent crude, the benchmark for oil, hit a high of $ 80.07, settling 1% higher for the day at $ 79.70 a barrel.
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