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Stocks rebound on Powell’s comments, oil tops $110, bond yields up

Jerome Powell

Asia markets are set to open higher following a relief rally in the US markets overnight, as Federal Reserve chair Jerome Powell toned down plans for an aggressive rate-hike policy, due to the impact of the Ukraine-Russia conflict.

SPI futures are pointing to a 1% rise at the open of the S&P/ASX 200, and the NZX 50 rose 0.91% in the first half an hour of trading.

US and EU stocks

US stocks accelerated after Powell signalled the US central bank will be careful in its approach to rate hikes, amid uncertainty caused by the geopolitical unrest. All three major indices ended positively. The Dow Jones Industrial Average rose 1.79%, the S&P 500 jumped 1.86%, and Nasdaq was up 1.62%.

The broader European markets also finished higher on Wednesday. The Euro Stoxx 50 rose 1.45%, the DAX gained 0.69%, and the CAC 40 was up 1.59%. 

All of the 11 sectors in the S&P 500 were green. Energy continued to rise amid a soaring oil price, while US banks' stocks rebounded, with bond yields recovering losses from a four-day decline. JPMorgan Chase and Citigroup were up 2% and 1.65% respectively. Wells Fargo rose 3.83%, and Goldman Sachs gained 2.46%.

Growth stocks also had a strong session on the Fed’s comments, with the mega-cap companies all closing higher. Apple’s share price jumped 2.39% after the company announced its plan to unveil a new series of products, including a low-cost 5G iPhone and a new iPad. The event will be held on 8 March. Meta Platforms was up 2.33%, and Microsoft rose 1.88%.

On the data front, the ADP job data gives a positive sign for the labour market's improvement. The data shows that the US has added 475,000 jobs in the private sector in February, more than the forecast at 400,000, indicating strong growth for the non-farm payrolls number to be released on Friday.

Treasuries

Government bond yields rebounded from the early-week losses. The 10-year US Treasury yield rose to 1.88% from 1.73% the previous day. And the 2-year Treasury yield jumped to 1.512% from 1.33% a day ago.

The Germany 10-year bond yield was traded at 0.018%, and the France 10-year bond yield was up to 0.47%. The UK 10-year Gilt yield rose to 1.26%.

Commodities

Gold futures retreated from a sharp gain yesterday, down $13 (USD), to $1,939 per ounce, and silver futures fell slightly to $25.40 per ounce.

Crude oil prices consolidated above $110 (USD) per barrel amid ongoing undersupply issues and concerns of the embargo on Russia’s oil exports. OPEC+ decided to stick with the plan for an output increase of 400,000 barrels per day despite the soaring oil price, with many members struggling to fulfil their supply obligations. WTI futures surged 7.7%, to $111.38. Brent crude futures rose 8.73%, to $114.12.

Currencies

Commodity currencies continue to rise against the eurodollar and US dollar amid rising commodity prices, as well as less of an impact of geopolitical tensions on these countries’ economies. The Canadian dollar was up 0.83% against the greenback after the BOC raised the interest rate by 25 basis points to 0.5%. The Eurodollar stayed flat against the USD at just above 1.11, still showing downside pressure. The safe-haven currencies, including the Japanese yen and Swiss franc, fell as risk-on sentiment somewhat returned.

Cryptocurrencies

The crypto markets paused a four-day rally as US officials vow to target cryptocurrencies to enforce sanctions on Russia. The leading cryptocurrencies ran off near-term highs. Bitcoin fell to just under $44,000 (USD), and ethereum was traded at above $2,900 after topping the $3,000-mark.


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