Stock price rises as supply taper without tantrum, BoE takes the stage


Sydney — The stock market remained strong on Thursday after the Federal Reserve Board of Governors began an orderly unwinding of large-scale stimulus measures, but doubts about the inflation outlook pushed long-term bond yields up. ..

“Remember that the taper isn’t tightened,” said Kelly Craig, global market strategist at JP Morgan Asset Management, saying the Fed’s balance sheet will grow by about $ 400 billion over the next eight months. Stated.

“This is still a very accommodative policy environment that supports growth prospects for the coming quarter and the performance of risky assets such as equities and credits.”

Concerns are now on the Bank of England, which could start a rate hike cycle later in the day, with uncertain impact on the global bond market.

So far, equity investors have been pleased that the Fed has not rushed to remove the policy punch bowl and Nasdaq futures have risen 0.2% to a record high. If sustained, it will be nine consecutive profit sessions.

S & P 500 futures remained strong, EUROSTOXX 50 futures rose 0.5% and FTSE futures rose 0.4%.

Japan’s Nikkei Stock Average rose 0.8%, hitting a monthly high, while MSCI’s widest non-Japanese Asia Pacific stock index rose 0.4%.

The Asian index is burdened by a surge in new coronavirus cases in China, which could curb consumer spending in an already slowing economy.

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On November 4, 2021, a currency trader will make a gesture at the Forex Trading Office in Seoul, South Korea. (Lee Jin-man / AP Photo)

Powerful reading about US services and employment has helped me feel better elsewhere.

As expected, the Fed has announced that it will cut $ 15 billion in bond purchases a week starting this month, leaving options to speed up or slow down as needed.

Federal Reserve Board Chair Jerome Powell is a little uncertain whether inflation will prove to be momentary, enough to hit long-term bonds and steep yield curves. was.

Not surprising

“Overall, we didn’t get anything that meant that the market price for hiking was higher than it is today,” said Jan Nevruzi, an analyst at NatWest Markets.

Fed futures mean they will rise to 0.25% by June and 0.5% by the end of 2022.

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The Federal Reserve Building will be seen in Washington on October 20, 2021. (Joshua Roberts / Reuters)

“It’s not a super-dubish meeting, but the results are far from some of the more amazing hawkish surprises recently seen by banks of Canada and others,” Nebulge added.

Central banks in Canada and Australia have caused turmoil in bond markets in recent weeks by suddenly changing their policy efforts.

The Polish central bank was surprised by the aggressive withdrawal overnight, raising tensions on the BoE meeting, where decisions could be very close.

Uncertainty continued to sterling at the edge at $ 1.3659, which was low at $ 1.3605 overnight.

The dollar was idling at 93.955 as speculators posted profits in long positions, although the uptrend has continued for the past five months. Aiming for the recent high of 114.69, the yen remained strong until 114.15.

The euro rose to $ 1.1595 overnight, but was hampered by expectations that the European Central Bank would tighten the Fed by a small margin.

In commodities, rising bond yields dithered gold at about $ 1,774 per ounce.

Oil prices have fallen as US inventories have increased and Iran has announced resumption of negotiations on a nuclear deal. Pressure is also rising for OPEC + to expand production at a meeting later Thursday, but there are signs that the group will stick to its current plans.

Brent fell more than 4% overnight, then fell 63 cents to $ 81.36 a barrel, and US crude fell another 83 cents to $ 80.03.

Wayne Cole

Reuters

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