Stocks Continue to Pull Back Ahead of Fed Chair Testimony
US Stock markets opened the week after a long weekend on the back foot as investor sentiment dropped ahead of key testimonies from Fed Chair Jerome Powell. The Dow fell 0.72%, the S&P 0.47% and the Nasdaq lost 0.16% by the close of trading. The US dollar made some further ground yesterday noticeably against the antipodean currencies after China cut its benchmark loan prime rates for the first time in 10 months. The move from China also led to a drop in Oil prices, WTI now trading around $70.50/b and Brent is around $76/b.
Fed Chair Jerome Powell in Congress
Global markets have seen a bit of consolidation over the last couple of days as traders took advantage of a bit of a break in market events to reassess positions and tactics. However, expect volatility to pick up into the last few days of the week as the focus moves to the Fed once again with Jerome Powell appearing before both the House Financial Services Committee and the Senate Banking Committee on consecutive days. Stocks and risk trades in general have reacted strongly since last week’s Fed pause but investors are concerned that the Chair could push a more hawkish rhetoric with Congress, and we see some harder, sharper corrections. Undoubtedly, Wednesday’s testimony has the potential for more market impact as the guidance is very unlikely to change for the next day, but traders are prepared for swings in both directions as fence-sitting is a prized skill when talking in Washington!
Markets Set for More Moves Today
It’s been a relatively quiet start to the week, but the data and events calendar does start to heat up from today. We have already seen the release of the BOJ’s Monetary Policy Meeting Minutes in the Asian session where they have confirmed the reasons for maintaining the ultra-low rates and UsdJpy has jumped on the back of these. There is little else of note due out in Asia, but we have key inflation numbers from the UK on the London open and these come just a day before the next MPC rate announcement. The initial focus on the New York opening will be north of the border for the release of the Canadian Retail Sales numbers but the real potential market mover comes with Jerome Powell’s testimony later in the day.
