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Jay Powell, Federal Reserve chair, triggered a sudden sell-off in long-term US Treasury debt and equities after he vowed to keep monetary policy loose even as the economy improves and inflation begins to rise.
Speaking on Thursday, Powell said the central bank expected to be “patient” in withdrawing support for the recovery, given that the labour market remained far from the central bank’s goal of full employment and had made little progress in recent months.
Powell failed to alleviate fears that the Fed reacted too slowly to the rise in inflation expectations and long-term Treasury yields. Yields on 10-year Treasuries spiked 0.07 percentage points to 1.55 per cent after his remarks, reviving a rout in the $21tn market for US government debt.
In equity markets, the benchmark S&P 500 index extended recent losses, briefly wiping out gains for the year so far, with a fall of as much as 1.7 per cent. The technology-focused Nasdaq Composite closed down 2.1 per cent, turning negative for the year.
The Fed chair suggested that although central bank officials were watching the market movements, it would take more to perturb them.
“As it relates to the bond market, I’d be concerned by disorderly conditions in markets or by a persistent tightening in financial conditions broadly that threatens the achievement of our goals,” he said. (FT)
Kamala Harris broke a tie in the US Senate after the chamber split along party lines over whether to proceed with a debate on Joe Biden’s $1.9tn stimulus. Progressive Democrats, meanwhile, are calling to scrap an arcane Senate procedure known as the filibuster to enact Biden’s policy agenda.
Italy has blocked a shipment of the Oxford/AstraZeneca Covid-19 vaccine to Australia, the first since the EU introduced rules governing jab exports from the bloc. France on Friday said it supported Rome’s decision.
A surge in pandemic-driven poverty and unemployment in Latin America threatens to set the region back more than a decade, a UN agency warned.
China has targeted 6 per cent GDP growth in 2021 after reining in Covid-19. (FT)
In the news
Exclusive: Bank of America reaps trading windfall BofA gained hundreds of millions of dollars in trading revenue when the Texas electric grid failed in a winter storm last month, industry executives and traders said. The bank’s Houston-based energy trading group had electricity contracts that soared in value when wholesale Texas power prices rose 10,000 per cent from the mayhem that knocked out power and heat across the state. (FT)
US trade agency criticises Ford over deals with SK Innovation The US International Trade Commission has lambasted Ford for pursuing deals with South Korean company SK Innovation despite evidence that it had misappropriated trade secrets from LG Chem to develop electric vehicle batteries. (FT)
Companies rush to issue convertible debt Airbnb and Twitter both issued convertible debt this week, becoming the latest companies rushing to lock in rock-bottom interest rates in case recent wobbles in stock and bond markets dent investor enthusiasm. “We’ve never seen pricing like this ever in the convertible market,” said one banker. (FT)
EU to launch legal action against UK Maros Sefcovic, Brussels’ Brexit chief, has warned the EU will launch legal action against the UK “very soon” in response to British plans to unilaterally grant Northern Irish businesses longer waivers from trading rules agreed by the two sides. (FT)
Oil jumps as Opec and allies decide against output rise Opec and Russia decided against unleashing a flood of crude on to the market after Saudi Arabia urged fellow oil producers to “keep our powder dry” in the face of persistent…
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