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European markets remained flat on Tuesday as all eyes are on Jerome Powell’s imminent congressional statement.
European markets are currently flat as investors await the congressional testimony by Federal Reserve Chair Jerome Powell. For instance, the pan-European Stoxx 600 remained flat today as trading began, with most sectors hovering in slightly positive territory. Meanwhile, tech stocks were down 0.3% and at the forefront of modest losses. Conversely, retail was up 0.8% to lead gains.
Powell’s fiscal comments, which are due Tuesday and Wednesday, should provide further clues regarding the apex bank’s rate hike stance. In addition, investors, analysts, and market observers would also be listening in on the Fed Chair’s testimony for economic health cues.
Powell would likely convince legislators of his commitment to stifling inflation without compromising the rest of the US economy. There are already prevalent fears that the Fed’s incessant steep rate hikes could inadvertently trigger a recession.
Although US stock futures traded slightly higher amid flat European markets, trade in the Asia-Pacific region remained mixed.
US & Asia-Pacific Performances amid Flat European Markets
In the US, S&P 500 Index (INDEXSP: .INX) was up 0.1%, with futures for the Dow Jones Industrial Average (INDEXDJX: .DJI) also climbing 0.1%. Furthermore, the Wall Street Journal Dollar Index remained flat at 97.51. However, the yield on the 10-year US Treasury slid 1.3 basis points to 3.952% from 3.965%.
Meanwhile, Asia’s ‘mixed bag’ stock performance saw Japan’s Nikkei 225 index climbing 0.3%. However, the Hang Seng in Hong Kong conversely slid 0.3%, with China’s benchmark Shanghai Composite also dipping lower by 1.1%.
Besides the Stoxx Europe 600 shedding 0.2% in morning trade, HelloFresh declined 9% in Europe. Recorded losses were extensive, with NEL losing 6.4% and the FTSE 100 giving up 0.1%. In addition, the French CAC 40 slid 0.2%, while Germany’s DAX declined 0.1%. The German 10-year Bund yield dropped by 4.6 basis points from 2.746% to 2.701%.
However, there were some top earners amid Tuesday’s general European stock setback. For instance, the Zalando SE surged 4.2%, while Ashtead Group rose 3.1% in the same timeframe.
On the commodity side of things, Brent crude was flat at $86.18 a barrel. In addition, WTI crude was also flat at $80.45 a barrel on Tuesday.
US Treasury Yields Ride Sustained Fed Rate Hikes Higher
Last week, the 2-year Treasury yield attained a 17-year high point amid sustained fed interest rate hikes. The 2-year yield initially surged 4.937%, while the 10-year Treasury rose by more than 3 basis points to 4.028%.
Last Wednesday, Atlanta Federal Reserve Bank President Raphael Bostic advocated for sustained higher rates to stem inflation. At the time, Bostic also addressed the delicate balance between higher rates and associated hardships, saying:
“[Increasing interest rates] without inflicting severe economic pain is a delicate balance. But striking that balance is our job, as the Fed’s dual mandate is to pursue price stability and sustainable full employment. In the long run, the latter is not achievable without the former.”
Bostic also said it would be imprudent for the Fed to reverse its rate-hiking policy now, suggesting a 5% and 5.25% increase.