Powell’s speech failed to dissipate investor concerns over the potential rise in inflation, pushing US 10-year Treasury yields higher. Fed Chairman said inflation is likely to rise as the economy recovers, but he thinks it will be temporary and won’t be enough to spur the central bank to hike interest rates. Meanwhile, investors had been looking for him to address the recent surge in rates. As a result, Wall Street indexes saw another bearish session overnight, with Asian markets following suit on Friday.
Similarly, European equities opened lower to start the day. Adding to worries was the news that a new European Union regulation blocked a shipment of 250,000 doses of AstraZeneca’s drug that were destined for Australia. Of note, the World Health Organization warned that the number of new coronavirus cases across the globe rose last week for the first time in seven weeks.
Against this backdrop, the FTSE 100 in London sheds 0.72% to 6,603, Italy’s FTSE MIB loses 0.31 percent to 23,022, France’s CAC 40 is down by 0.82% to 5,782, while the German DAX 30 is 0.78% lower, at 13,946. US stock index futures are keeping slightly lower after having pared early losses as market focus is shifting towards the US employment data due later today. Last NFP data came in slightly below the consensus, at 49,000 versus 50,000 expected. For the month of February, economists are anticipating a 185,000 reading in nonfarm payrolls.
In currencies, the safe-haven USD index rose to fresh 2021 highs on Friday, deriving support from rising US Treasury yields for the third session in a row. As such, EURUSD dipped to fresh three-month lows just above the 1.1900 figure before bouncing slightly as the yields have stabilized somewhat during the European hours. Still, the common currency remains under heavy selling pressure and could derail the mentioned support before the weekend if the upcoming US jobs data surprises to the upside.
Meanwhile, oil prices rallied to fresh early-2020 highs above $68 following the OPEC+ decision to extend production cuts for another month despite a recent price surge. Russia and Kazakhstan were granted exemptions to increase their output by a small amount. In the short term, the futures will likely stay elevated and could even climb to fresh multi-month highs. However, risks are building for a correction, considering risk-off sentiment and overbought conditions in the oil market.
Nathan Lambert, Head of Global FX Analytical Department