The US 10-year bond yields exceeded 3%. ECB monetary policy meeting in focus

June 9, 2022

The broader tech sector was under pressure from rising Treasury yields yesterday, with 10-year bond yields exceeding 3% amid continued bets that the Federal Reserve will stay on course to raise rates to fight inflation. The disappointing comments triggered a wave of analyst downgrades on Wall Street. As a result, US stock indices fell yesterday. At the close of the day, the Dow Jones Index (US30) decreased by 0.81%, while the S&P 500 (US500) lost 1.08%. The NASDAQ Technology Index (US100) fell by 0.73% yesterday.

Treasury Secretary Janet Yellen said Wednesday that inflation will not be a decade-long problem for the United States and that the Biden administration’s spending on the COVID-19 bailout only “modestly” pushed prices up. On Tuesday, Yellen told the Senate Finance Committee that high inflation is likely to continue, although she hopes it will come down soon, and that the Biden administration will likely raise its budget forecast to 4.7% inflation for this year. Many House Republicans believe that the Biden administration’s $1.9 trillion COVID-19 bailout measure, known as the American Rescue Plan, is one of the main causes of high inflation.

Stock markets in Europe decreased yesterday. German DAX (DE30) decreased by 0.76%, French CAC 40 (FR 40) lost 0.80%, Spanish IBEX 35 (ES35) added 0.01%, and the British FTSE 100 (UK100) closed yesterday down by 0.08%.

The long-awaited ECB monetary policy meeting will be held today. With a high probability, the ECB will officially announce the end of its net asset purchases and schedule its first interest rate hike for the month of July. The ECB is also likely to try to remain flexible to change rates if necessary and use other tools to provide liquidity support.

According to preliminary data from the German Federal Statistical Office (Destatis), in April 2022, the industrial production index increased by 0.7% compared to the previous month. In March 2022, there was a significant decrease of 3.7% compared to February 2022.

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Oil prices jumped about 3% to a 13-week high on Wednesday as US gasoline demand continues to rise despite record gasoline prices amid expectations of higher oil demand in China and tight supply. The US crude inventories rose unexpectedly last week, while inventories in the Strategic Petroleum Reserve fell by a record amount as refinery capacity rose to its highest level since January 2020.

Asian markets closed yesterday in positive territory. Japan’s Nikkei 225 (JP225) gained 1.04%, Hong Kong’s Hang Seng (HK50) jumped by 2.24%, and Australia’s S&P/ASX 200 (AU200) increased by 0.36%.

Australia’s sharp interest rate hike sent shockwaves across the country. At the same time, according to the big four banks, another massive increase will occur in just a few weeks. Australia faced an aggressive rate hike on Tuesday when the Reserve Bank announced that the official interest rate would jump from 0.35% to 0.85% in an attempt to curb rapidly rising inflation. The NAB expects interest rates to reach 2% by the end of this year, and ANZ expects two more hikes in 2022.

The Chinese authorities are winding down one of the longest lockdowns in recent years, positively affecting many industries (especially related to construction and infrastructure). At the same time, analysts are surprised that copper prices (which are highly dependent on the state of China’s economy) are falling again.

Main market quotes:

S&P 500 (F) (US500) 4,115.77 −44.91 (−1.08%)

Dow Jones (US30) 32,910.90 −269.24 (−0.81%)

DAX (DE40) 14,445.99 −110.63 (−0.76%)

FTSE 100 (UK100) 7,593.00 −5.93 (−0.078%)

USD Index 102.56 +0.24 (+0.24%)

Important events for today:

– Eurozone ECB Interest Rate Decision at 14:45 (GMT+3);
– Eurozone ECB Monetary Policy Statement at 14:45 (GMT+3);
– Eurozone ECB Press Conference at 15:30 (GMT+3);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
– US Natural Gas Storage (w/w) at 17:30 (GMT+3);
– Canada BoC Gov Macklem Speaks at 18:00 (GMT+3).

by JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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The US 10-year bond yields exceeded 3%. ECB monetary policy meeting in focus