Stocks climbed as investors shrugged off tapering concerns highlighted in minutes of the Federal Reserve’s last meeting. The dollar gained and the Treasury yield curve flattened as short-end rates rose.
The S&P 500 rose, after briefly dipping following release of the minutes, with real estate and energy stocks leading gains. The tech-heavy Nasdaq 100 outperformed major benchmarks. Trading volume has been less than average ahead of the US Thanksgiving holiday. A gauge of the dollar jumped to the highest since July 2020. Data earlier today showed a resilient US consumer despite accelerating inflation.
The 2-3 November meeting minutes noted the committee “would not hesitate to take appropriate actions to address inflation pressures”. Since then, inflation surged to the highest rate since 1990 and Fed officials have said it may be appropriate to discuss quickening the pace of tapering at the December meeting. That has triggered a jump in Treasury yields, with the 2Y rate soaring to the highest since early March 2020 and markets bringing forward bets on rate hikes.
US personal spending rose in October from a month earlier by more than expected, while a closely watched inflation measure posted the largest annual increase in three decades. In addition, data showed 199,000 people made initial jobless claims in the period ended 20 November, the least since 1969, while orders placed with US factories for business equipment rose in October by more than forecast, highlighting solid momentum for capital investment at the start of the fourth quarter.
Damping inflation is now centre-stage for policymakers, with ultra-loose, pandemic-era stimulus set to be wound down. At the same time, investors are on the edge over the resurgence in Covid, notably in Europe. – Bloomberg News.
The S&P 500 Index upped 0.23% to 4,701.46 on Wednesday (24 November), the Dow Jones Industrial Average dipped 0.03% to 35,804.38, and the Nasdaq Composite Index rose 0.44% to 15,845.23.
The factors stoking inflation in Europe are becoming more structural and simultaneously affecting economic growth, according to European Central Bank (ECB) Vice President Luis de Guindos.
While supply bottlenecks and higher energy costs are transitory by nature, inflation has not eased as much as the ECB had projected, Guindos said late Tuesday (23 November) in a speech in Madrid. The situation is also leading to greater uncertainty in making economic predictions, he said.
“The European Central Bank is continuously pointing out that the inflation rebound in recent months is of a transitory nature,” Guindos said. “However, we have also seen how in recent months these supply factors are becoming more structural, more permanent.”
The remarks chime with recent comments by other ECB officials on the risks from the current bout of elevated consumer-price growth – even as a new wave of Covid sweeps across the continent.
Guindos said he is confident Europe’s economy will continue its healthy growth path, despite the surge in infections. – Bloomberg News.
The Stoxx Europe 600 Index inched 0.10% higher to 479.69.
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