US stocks fall when Biden nominates Powell for the second Fed term

Wall Street shares fell on Monday when traders reacted to the news that Joe Biden had nominated Jay Powell as chairman of the Federal Reserve for another term, with Lael Brainard elected as deputy chairman.

The US blue-chip S&P 500 stock index gave up earlier in the day when Powell’s reputation was first announced, ending the day 0.3 percent lower in New York. The technology-heavy Nasdaq Composite index also fell late on the trading day, closing 1.3 percent lower.

Technological stocks are considered particularly sensitive to rising interest rates, with Powell̵[ads1]7;s renomination expected to result in a more hawkish tilt to the US Federal Reserve’s policy than if Brainard had been elected as a candidate for the Fed chair.

In the government debt markets, the yield on the two-year government bond, which is sensitive to interest rate expectations, rose to the highest level since March 2020, lasting 0.09 percentage points to 0.59 percent, “to talk about the hawkish implications of a nomination for 2022 in particular.” , BMO strategists noted Monday morning.

The yield on the benchmark index for 10-year government bonds rose by about 0.08 percentage points to 1.62 per cent. Bond yields are reversing their prices.

Anthony Collard, head of investment for the UK and Ireland at JPMorgan Private Bank, said the outlook for a new era for Powell was “positive, all in all”.

«His navigation of the crisis [while] Sustaining growth shows us that he has done a commendable job, Collard said.

Stock markets were subdued across the Atlantic. European stocks had risen during the afternoon session, but fell later. Several countries in the bloc were forced last week to reintroduce pandemic restrictions.

Europe’s stock index Stoxx 600 closed 0.1 percent lower on Monday, after falling 0.3 percent during the previous trading day.

Protests erupted in Austria, Italy and Belgium among other European countries over the weekend, after governments stepped up coronavirus restrictions in response to higher numbers of infections.

London’s FTSE 100 stock index ended 0.4 percent higher.

Elsewhere, Asian stock markets were mixed. Hong Kong’s Hang Seng index fell 0.4 percent while China’s CSI 300 index rose 0.5 percent. Shares in emerging markets fell more generally on Monday after selling pressure last week as investors increasingly shifted their attention to developed economies where interest rates were expected to rise over the coming year.

A broad FTSE barometer for EM equities fell 0.9 percent in US dollars, after falling 1.4 percent during the last week.

In currencies, the US dollar index – which measures the dollar against six other currencies – rose 0.5 percent. The euro weakened around 0.5 percent against the US currency to $ 1,124, the lowest level since the summer of last year when traders bet that the bloc’s central bank would stick to ultra-low borrowing costs even though US and UK decision-makers were expected to raise interest rates.

The Turkish lira reached about TL11.4 against the US dollar on Monday, the weakest level ever. Last week, the country’s central bank cut interest rates by 1 percentage point to 15 percent. The currency has fallen more than 30 percent this year as prices have fallen from 19 percent in early September, against a backdrop of high inflation.

Brent oil, the oil reference, rose to a high of $ 80.07, settling 1 percent higher for the day at $ 79.70 per barrel.

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