At the press conference, Federal Reserve Chairman Jerome Powell said that the current monetary policy is appropriate and there is no reason to change the volume of stimulus amid the sharp rise of Treasury yields in the last month. Against this backdrop, investors’ concerns about monetary policy were dissipated, and reflationary trading pushed the stock indices to new records.
The rise of the 10-year government bonds yield, along with the expectation of faster growth in the US economy than expected in December, supports bulls on stock markets. The S&P 500 index reached 3.977 in the Asian session – the highest level within a year. The Dow Jones closed trading at 30.015, adding 0.58%. Treasury yields continue to rise and have already reached 1.71%, as traders in the credit market don’t expect the Fed to intervene in trading.
Now the market will focus on the meeting of the Bank of England, the results of which will be announced today in the midst of the European session. Since no changes are expected in interest rates or bond purchases, traders will focus on hints about the future direction of the central bank’s monetary policy.
In his recent comments, BOE Governor Andrew Bailey tried to balance the improving economic outlook with the contraction of GDP in the first quarter and the likely rise in unemployment. There is a possibility that the recent increase in yields will prompt the Bank of England to increase purchases, as did the ECB, but it is small. To a greater extent, the market expects that the monetary regulator will ignore the growth in yields following the Fed.
In its latest decision, the Bank of England indicated that it doesn’t intend to tighten monetary policy, at least until there are clear signs that the economy has got out of the crisis, and inflation is moving towards the bank’s goal of 2%.
Main market quotes:
- S&P 500 (F) 3,942.88 -20.62 (-0.52%)
- Dow Jones 33,015.37 +189.42 (+0.58%)
- DAX 14,686.25 +89.64 (+0.61%)
- FTSE 100 6,745.65 -17.02 (-0.25%)
- USD Index 91.560 +0.125 (+0.14%)
- Australia Employment Change (Feb) at 02:30 (GMT+2);
- BoE Meeting Minutes at 14:00 (GMT+2);
- United States Initial Jobless Claims at 14:30 (GMT+2);
- Philadelphia Fed Manufacturing Index (Mar) at 14:30 (GMT+2).