In anticipation of Federal Reserve Chair Jerome Powell’s speech at the end of the week, which may indicate a reaffirmation or “pivot” from an aggressive policy to tame runaway inflation, the dollar eased while U.S. and European stocks edged higher on Wednesday.
As investors shifted their recent expectations the Fed could slow its hiking of interest rates to a view that Powell remains committed to bringing inflation down to the Fed’s target of 2%, gold prices edged lower on a dollar that has been strengthening.
While benchmark lending rates in the US, UK, and Europe increased, shares on Wall Street and in Europe increased as investors grew wary of the impact of rising energy prices on inflation. The benchmark 10-year US Treasury price increased further above 3%, while the 13-year high for two-year UK gilts was 2.955%.
“The 10-year starts to struggle when it rises above 3%, which is when stocks start to suffer. We witnessed that in May, June, and are currently witnessing it once more “said Anthony Saglimbene, chief market strategist at Troy, Michigan-based Ameriprise Financial.
“That will be a headwind as long as the 10-year remains above 3%,” he said.
Fed funds futures traders are pricing in a 56.5% chance of a 75 basis point increase next month and a 43.5% chance of a 50 basis point increase.
According to Jackson Hole, “the market is gyrating between this ultra, ultra hawkish view and this ultra, ultra dovish view.” said Saglimbene. It will fall somewhere in the middle, she said.
The S&P 500 increased by 0.16%, the Nasdaq Composite increased by 0.33%, and the Dow Jones Industrial Average increased by 0.07%.
The global STOXX 600 index increased 0.32% in Europe, while the MSCI index of stocks around the world showed no change.
The euro hit a low dating back two decades before recovering to trade 0.10% higher at $0.9976.
The pace of new orders for capital goods produced in the United States slowed in July compared to the previous month, which suggests that after falling in the second quarter, business spending on equipment may find it difficult to recover.
According to data released by the Commerce Department on Wednesday, orders for non-defense capital goods, excluding aircraft, increased 0.4% in December. Orders for these “core capital goods” increased by 0.9% in June.
The benchmark for the group, the 10-year government bond yield for Germany, reached a brand-new eight-week high of 1.38%.
Benchmark After initially rising above $100 a barrel, Brent crude fell. Saudi Arabia has said that the Organization of Petroleum Exporting Countries may think about reducing output, but central bankers’ negative economic signals are weighing on the decision.
U.S. crude prices were down 0.5% at $93.27 per barrel, while Brent prices were down 0.41% at $99.81 per barrel.
United States gold futures declined 0.3% to $1,758.60.
