Markets wait for Fed’s signals
European shares dipped in early trading on Wednesday ahead of U.S. Federal Reserve Chair Jerome Powell’s two-day testimony where investors will closely watch for signs of an interest-rate cut later this month.
Powell is scheduled to give his semi-annual monetary policy testimony to Congress at 1400 GMT, and investors see a worrying lack of inflation globally as one reason for Powell to sound suitably dovish.
The pan-European shares index fell 0.2% and was on course to extend losses to a fourth day, with Spain’s IBEX underperforming with a 0.4% loss.
Stocks with exposure to Mexico led losses in Madrid with BBVA, Iberdrola and Telefonica down between 0.6% and 0.8%, after a shock resignation of Mexican Finance Minister Carlos Urzua on Tuesday rattled Mexican markets.
Asian shares pulled ahead on Wednesday while rising Treasury yields lifted the dollar as investors waited anxiously to hear if the world’s most powerful central banker would confirm or confound expectations for U.S. easing this month.
MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.4%, after three sessions of losses.
The cooling in U.S. rate fever has seen bonds give back just a little of their rally. Yields on two-year Treasuries rose to 1.917% from their recent low of 1.696% and Europe’s benchmark yields up around five basis points.
That in turn has helped the dollar index against a basket of currencies rebound to 97.500 from a June low of 95.843.
The dollar also gained to 108.92 yen, though the brighter French data helped the euro gain to $1.1225, still down from its $1.1412 level of just a couple of weeks ago.
Gold fell 0.3% to $1,393.68 per ounce as the dollar gained. Oil prices were supported by Middle East tensions and news that U.S. stockpiles fell for a fourth week in a row, easing concerns about oversupply.
Brent crude futures rose 64 cents to $64.80, while U.S. crude gained 82 cents to $58.65 a barrel.
This article was compiled by BOV Asset Management Limited, a member of the BOV Group. BOV Asset Management,TG Complex, Suite 2, Level 3, Brewery Str., Mriehel BKR 3000. Email: infoassetmanagement@bov.com Internet address: www.bovassetmanagement.com. BOV Asset Management is licensed by the MFSA.