Fed chat sends bonds and shares lower

WORLD stock markets broadly fell and government debt yields rose on Tuesday as traders perceived a greater tightening of US monetary policy than forecast after remarks by the new Federal Reserve chief in testimony before the US Congress.

Fed Chairman Jerome Powell pledged to balance the risk of an overheating economy and the need to keep growth on track in his prepared testimony, but Mr Powell’s remark that inflation has strengthened since December sent yields higher and stocks lower.

In Dublin the Iseq was down 0.11pc but well-received results from FBD saw the insurer’s shares rally almost 14.83pc and hotel group Dalata was up 2.94pc on the back of its results, both bucking the market.

Elsewhere, 10-year US Treasury bonds, the global benchmark for commercial lending, jumped past 2.9pc and equity markets in Europe and Wall Street turned south, with MSCI’s key index of global equity performance falling 0.4pc.

The dollar added to gains against the euro, the yen and a basket of major currencies and gold prices fell as Powell’s comments were in general positive for the greenback, said Brad Bechtel, managing director FX at Jefferies, in New York.

“He is hawkish in the context of being very upbeat on the economy but willing to go at a moderate pace to normalize policy,” Mr Bechtel said.

The dollar index rose 0.54pc, while the euro was down 0.61pc to $1.2241. The Japanese yen weakened 0.49pc versus the greenback to 107.47 per dollar.

Eurozone bond yields initially rose after Powell’s early comments but soon trimmed those gains in line with US bond yields.

Germany’s 10-year bond yields rose 1.5 basis points to 0.674pc, shrugging off news that German inflation has slowed.