Equity bulls remain in control, central bankers in focus
The bulls are out in force again as stocks in Europe and the US are driving higher. The absence of negative news is lifting sentiment. President Biden has announced the US will send an additional $800 billion in aid to Ukraine, but as far as the markets are concerned that is unlikely to rock the boat. The prospect of additional sanctions might dent sentiment but seeing as that isn’t looking likely anytime soon, we are seeing strong gains across the board. The DAX and the CAC have registered two-week highs - which says a lot about the attitude in mainland Europe – those markets have a track record of suffering when the economic war between the West and Russia ticks up. The NASDAQ 100 has recouped some of the ground it lost yesterday. Shares in Netflix took a beating, which weighed on the tech sector. Even though Netflix shares are in the red again, the NASDAQ is up over 0.4%.
US bond yields are rising, the 10-year yield is above 2.92%, it is not too far away from the three-year high that was set on Tuesday. Yields will remain in focus as Fed boss, Jerome Powell, will deliver a speech later. A few weeks ago, Mr Powell indicated he is open to the idea of introducing larger than normal rate hikes. Traders took that as a sign that rates might be lifted by 50 basis points. This week, the Fed’s James Bullard didn’t rule of the possibility of a 75-basis point hike, so people will be analysing Mr Powell’s statement closely.
Also speaking later is ECB President Christine Lagadre, and BoE Governor, Andrew Bailey. The update from Ms Lagarde will be of particular importance considering Luis de Guindos comments this morning, where Mr de Guindos said the ECB could hike rates in July. As a result of the surprisingly hawkish comments, the euro is performing well.
Once again, gold and silver are lower as dealers are dumping lower-risk assets in favour of stocks. Even though the US dollar is down for a third day in a row, the commodities are unable to muster a rally, which speaks volumes about the lack of appetite for the metals.