As interest rates rise, Powell’s continued season will be melted down in the market


European stock markets were down on Tuesday, with a neutral opening expected for the U.S. based on futures. The future of the technology-weighted Nasdaq index was declining.

In the fixed income market, interest rates were clearly rising.

The interest rate on a 10-year U.S. government bond had risen by three basis points. Interest rates in the large euro area countries had risen by 5 to 9 basis points.

As the demand for fixed income securities decreases, their price decreases and the resulting market interest rate rises.

According to market commentators, the decline in both techno shares and fixed income securities is due to Jerome Powellin re-election to the Federal Reserve of the US Federal Reserve.

Powell is a safe name familiar to the market, but under his leadership, the Fed is expected to continue to gradually tighten monetary policy at a slightly tighter pace than would have been the case with another leadership option, the more dovert central banker. Lael Brainardin, chaired.

Director of the Fed’s Atlanta Regional Office Raphael Bostic noted on Monday that the Fed may need to speed up easing bond purchase programs and that interest rate hikes may begin earlier than expected.

The minutes of the Fed’s previous interest rate meeting will be published tomorrow. The minutes typically seek to hint at the financial sentiment of the Fed’s Open Market Committee and possible future changes in monetary policy.

In Europe, member of the Governing Council Francois Villeroy from Galhau stated that the ECB was serious about ending the PEPP purchase program in March. PEPP is a bond purchase program established in response to an acute pandemic situation last year. The ECB also has other securities purchase programs.

On Tuesday, better-than-expected Purchasing Managers’ Index figures were available for Europe from both industry and services. In the United States, Purchasing Managers Index figures will be released later today.

In the foreign exchange market, the euro strengthened against other major currencies on Tuesday.

The euro had strengthened 0.2 per cent against the dollar and yen and 0.3 per cent against the pound.

The euro received $ 1.1254 and the dollar $ 114.93.


Source: Arvopaperi by www.arvopaperi.fi.

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