Market Update Thursday 04/03/2021 – Fed-Chief sends markets south

Frankfurt – 04/03/2021

Fed-Chief sends markets south

Share prices continued to plummet after Fed Chairman Jerome Powell’s speech. The US central bank chief said at an online event of the “Wall Street Journal” that prices could also be expected to rise with an upswing in the labour market. But it would most likely remain a one-off effect in the wake of a wave of consumption once the pandemic had subsided. He does not expect an upward trend in prices to become entrenched. Even if labour market conditions improve, the Fed will not rush into anything.

With these statements, Powell unsettled the market enormously, and a real sell-off ensued. Tech stocks, in particular, which had been badly battered recently, were hit hard again.

US Markets at a glance

Wall Street moved further into the red today.

The Dow Jones opened little changed at 31,289.01 points but slipped significantly intraday and finally ended the day down 1.22 per cent at 30,923.55 points. Meanwhile, the NASDAQ Composite started 0.33 per cent weaker at 12,953.99 units and also fell into the deep red territory as it progressed. It ended down 2.11 per cent at 12,723.47 units.

Investors’ ears were strained in the direction of US Federal Reserve Chairman Jerome Powell’s speech. Powell did not reassure investors with his comments as hoped, said one market observer, explaining the falling stock and bond prices. Instead, he remained vague about what the Fed’s possible reactions might be if yields rose even more sharply. Earlier, the Fed chief had been cautious about the rise in capital market rates. He said only: “I would be concerned about disorderly conditions in markets or a continued tightening of financial conditions if it jeopardised the achievement of our objectives.” Moreover, Powell does not see any risks of inflation. If there is a temporary rise in consumer prices, this will be “patiently monitored”.

Far East Markets at a glance

There was also a sharp setback in Asia on Thursday. The Japanese benchmark index Nikkei lost 2.13 per cent to 28,930.11 points. While the Shanghai Composite on the Chinese mainland lost 2.05 per cent to 3,503.49 points, the Hang Seng leading index in Hong Kong fell by 2.15 per cent to 29,236.79 units.

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After the recovery on the previous day, concerns about rising interest rates dominated again on Thursday. Stock exchange traders fear that the rise in interest rates triggered by rising inflation expectations could possibly prompt the US Federal Reserve to make its monetary policy more restrictive earlier than planned.

European Markets at a glance

European stock markets followed the general negative trend, and the EuroSTOXX 50 lost 0.18 per cent to 3,705.95 points.

The DAX lost was trading in red territory the entire day but was able to cut its losses and closed only 0.17 per cent lower at 14,056.34 points. The TecDAX, on the other hand, extended its slide and closed 1.48 per cent lower at 3,270.58 index units.

The agreed index changes in the DAX were a topic of conversation. Siemens Energy will replace the Beiersdorf share on 22 March, while HelloFresh will remain in the MDAX due to stricter stock exchange rules. In addition to Beiersdorf, the VW holding company Porsche, the energy savings operator Encavis and the wind turbine manufacturer Nordex will join the index.

Forex, gold, oil and crypto

In the foreign exchange market, the greenback was boosted in the afternoon by the very cautious and vague US Federal Reserve Chairman Jerome Powell’s statements. The euro fell sharply in the wake of this and is currently trading at 1.1964 US dollars.

Meanwhile, the prospect of increasing Saudi Arabia’s voluntary production cuts drove up oil prices significantly on Thursday. North Sea Brent crude and WTI light oil both rose by more than 5 per cent to 67.47 and 64.51 US dollars per barrel, respectively. Opec and its partners, such as Russia, agreed on a smaller increase in production for April than analysts had expected at their meeting in London. 

The strengthening dollar also weighed heavy on the gold and pushed the price below $1,700. The closing price for the precious yellow metal was $1,699 per troy ounce.

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Cryptocurrencies couldn’t withstand the prevailing trend of falling prices today, with Bitcoin and co falling sharply. Bitcoin lost 8.5 per cent to $46,500, Ethereum dropped 7.4 per cent to $1,470, and Cardano even shed 14.6 per cent to $1.05. Surprisingly, a light at the end of the tunnel came from XRP with a daily gain of 1.5 per cent to $0.46.

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Corporate and world economic news

Economic data 

Unemployment in the eurozone remained stable in January. According to Eurostat, the European statistics authority, the unemployment rate remained at the previous month’s revised level of 8.1 per cent. Economists surveyed by Dow Jones Newswires had forecast a stable rate of 8.3 per cent for December based on the original figure.

Retail sales in the eurozone surprisingly fell significantly at the beginning of the year. Turnover in the sector fell by 5.9 per cent in January compared to the previous month, the European statistics office Eurostat announced in Luxembourg on Thursday. Analysts had anticipated a decline of only 1.4 per cent. In December, sales had risen by a revised 1.8 per cent. The development was similar in the EU as a whole.

The number of new jobless claims in the USA increased slightly again in the week ending 27 February. Compared to the previous week, the number of new requests rose by 9,000 to 745,000 on a seasonally adjusted basis, according to the US Department of Labour in Washington. Economists surveyed by Dow Jones Newswires had predicted an increase to 750,000.

New orders in the US industry increased by 2.6 per cent in January compared to the previous month and thus more than expected. Analysts had forecast an increase of 2.3 per cent. There was a plus of 1.6 per cent for the last month, as the US Department of Commerce further announced.

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