The US President Joe Biden supported Jerome Powell for a second four-year term as Chairman of the US Federal Reserve and nominated Lael Brainard as Vice Chairman. Such news positively affected financial markets. The S&P 500 increased by 0.51% and made a new all-time high, the Dow Jones Industrial Average gained 0.77%, but the Nasdaq Technology Index fell by 0.3%.
Treasury yields jumped on news of Powell’s reappointment, suggesting that many investors were betting on Brainard leaning more “dovish”, which would likely lead to a longer-term approach to monetary policy.
Rising government bond yields contributed to the sharp drop in gold and silver prices, as these instruments have an inverse correlation to the Treasury yield indicator. Fundamentally, the reduction of the QE program contributes to the decline in prices of precious metals.
Bank of America Corp. strategists are bearish for next year and urged investors to focus on cash since faster inflation and higher interest rates change the trajectory of global asset prices. The dollar index continues to rise as investors shift funds into dollars amid volatile markets. Many analysts are beginning to believe that the Democrats will “drop” the stock market.
European stock indexes finished Monday’s trading without a single dynamic. The German DAX dropped 0.27%, the French CAC 40 lost 0.1%, the British FTSE 100 added 0.4%, the Italian FTSE MIB gained 0.2%, and the Spanish IBEX increased by 0.8%. Investors are still concerned about the coronavirus infection in the region. Last week, Austria decided to introduce a lockdown. German authorities began to talk about the possibility of a similar measure because of the record numbers of the disease per day. In Germany so far, restrictions have been imposed only on those who have not been vaccinated against COVID-19. French authorities claim a new wave of disease in the country.
Oil prices are falling in anticipation of the US decision to use oil from the strategic reserve. One OPEC+ delegate said that the global oil-producing alliance may adjust its production plans if consumer countries release their reserves to increase supply on the market to push prices lower. The United States is preparing to sell oil from its inventories within the next 24 hours and that this move will be done in cooperation with other consumer countries (Japan, India).
Asian stock indexes traded multidirectional on Tuesday, watching a decline on Wall Street, as traders increasingly believe a rate hike in the US in 2022 after President Joe Biden re-elected Federal Reserve Chairman Jerome Powell for a second term. China’s benchmark CSI 300 index is on the opening level, while Hong Kong’s Hang Seng index decreased by 1.05%. The Australian ASX 200 was better than the market and increased by 0.78% on the back of gains in mining and energy stocks. Japanese markets are closed due to the bank holiday. Singapore’s inflation rate rose to 3.2% in October, the highest one since 2013.
Main market quotes:
- S&P 500 (F) 4,682.94 −15.02 (−0.32%)
- Dow Jones 35,619.25 +17.27 (+0.05%)
- DAX 16,115.69 −44.28 (−0.27%)
- FTSE 100 7,255.46 +31.89 (+0.44%)
- USD Index 96.53 +0.50 (+0.52%)
Important events for today:
- Singapore Consumer Price Index (m/m) at 07:00 (GMT+2);
- Germany Manufacturing PMI (m/m) at 10:30 (GMT+2);
- Germany Services PMI (m/m) at 10:30 (GMT+2);
- Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
- Eurozone Services PMI (m/m) at 11:00 (GMT+2);
- UK Manufacturing PMI (m/m) at 11:30 (GMT+2);
- UK Services PMI (m/m) at 11:30 (GMT+2);
- US Manufacturing PMI (m/m) at 16:45 (GMT+2);
- US Services PMI (m/m) at 16:45 (GMT+2).
