Powell’s renomination now heads to the Senate for confirmation
On Monday, President Joe Biden announced that he picked Federal Reserve Chair Jerome Powell to serve a second term. In a knee-jerk reaction to the announcement, Wall Street indexes surged to fresh all-time highs, but failed to preserve gains and finished mostly lower eventually. The tech-heavy Nasdaq Composite and the S&P 500 shed 1.26% and 0.32%, respectively. Bucking the trend, the Dow Jones gained 0.05%. After the White House announced the Fed decision, bank stocks jumped higher to outperform the broader market, with shares of JPMorgan and Wells Fargo rallying 2.13% and 3.11%, respectively.
Asian equities were mostly lower on Tuesday as investors prepared for the imminent end to the Fed’s large-scale bond-buying program after Powell’s reappointment for a second term. His renomination now heads to the Senate for confirmation. MSCI’s broadest index of Asia-Pacific shares outside Japan declined over 0.5% while markets in Japan were closed for a holiday. In China, the Shanghai Composite was up 0.2% while Hong Kong’s Hang Seng fell 1.20%.
European stocks opened lower to start the day, with the overall risk mood leaning towards being more defensive. On the data front, The manufacturing PMI in Germany hit ten-month lows to come in at 57.6 this month versus 56.9 expected and 57.8 prior, preliminary data showed. On the positive side, services PMI reached two-month highs of 53.4 as against 51.5 estimated and 52.4 previous. Reflecting more cautious sentiment in the market, US stock index futures are down across the board on Tuesday.
Meanwhile, the dollar consolidates yesterday’s rally, continuing to outperform its major rivals following Biden’s decision to nominate Powell for a second term as Fed chair. Against this backdrop, the USDJPY pair rallied to March 2017 highs beyond the 115.00 figure earlier in the day before profit-taking pushed the prices into negative territory during the European hours as USD demand has waned somehow. Later in the day, the greenback could be affected by US PMI data.