Daily summary: Powell's comments spook the markets

10:06 PM March 4, 2021

  • US stocks turn lower on Powell remarks
  • US 10-year Treasury yield jumps above 1.5% 
  • Gold hits 9-month low
  • Oil rallies as OPEC+ decided to maintain production levels unchanged

European indices erased early losses and finished today’s session in mixed moods. The ECB has been sending mixed signals on interest rates as policymakers are divided on whether or not bond buying should be accelerated and see no need for drastic action to fight rising yields, according to Bloomberg. Meanwhile weak economic figures weighed on market sentiment. Retail sales in the Eurozone plunged by 5.9% in January, the most since April's record slump and compared with market forecasts of a 1.1% decline. Meanwhile Markit PMI readings showed another solid contraction in construction activity in the Euro Area, Germany and France. Only in Italy activity rebounded at the quickest rate since late-2018. Dax fell 0.17%, CAC40 finished flat and FTSE 100 lost 0.37%.

US indices fell sharply after recent comments from Fed Chair Powell which said the economic reopening could increase inflation in the short-term but still the inflation is a long way from Fed targets and that any change in the Fed's QE would need actual progress towards those goals. Powell reiterated that the central bank would be “patient” before changing policy even as it saw inflation pick up in what it expects would be a transitory fashion. Powell added price increases above the Fed’s 2% target for a couple quarters or more would not cause consumers’ long-term inflation expectations to materially change. Treasury yields, which have been keeping investors on edge in recent weeks, rose to 1.53% after Powell’s remarks. On the data front, weekly jobless claims rose less than expected and new orders for US manufactured goods rose by 2.6 % from in January 2021, the largest increase since last July and above analysts’ estimates of a 2.1 % advance.  Dow Jones is trading 1.22% lower,  S&P fell nearly 1.4% while the Nasdaq 100 lost 1.6% so far.

WTI crude surged more than 4.6% and is trading above $64.00 a barrel, while Brent is jumped 4.40% and is trading near $67.00 a barrel as OPEC+ unexpectedly decided to keep oil output unchanged in April, while investors  were expecting more supply coming into the market. Also Saudi Arabia will maintain its voluntary production cut. Elsewhere gold fell nearly 0.7% , while silver is trading 2.7 % lower pressured by a stronger dollar and soaring US Treasury yields. The euro extended losses to fall below the $1.20 mark, having touched its lowest level since beginning of February. 

Gold came under heavy selling pressure today breaking below the $1,700 level for the first time since June 2020. If the current sentiment prevails downward move could be extended to the $1675 handle or even support at $1641. However, if buyers manage to  break above the upper limit of the descending channel then another upward impulse towards local resistance at $1741 could be launched. Source: xStation5

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