Stocks Rally as Powell Soothes Traders’ Nerves

US equities reversed losses and staged a rally as Federal Reserve Chairman Jerome Powell reaffirmed his view that the economy needs support. Government bond yields climbed along with oil prices. The S&P 500 rose by 1.14% to 3,925.43 while Dow Jones was up 424.51 points (1.35%) to 31,961.86.

Powell Pushes Back on Concerns of Prices Rising, Overheating

Federal Reserve Chair Jerome Powell emphasized his view that the economy has a long way to go in the recovery and signs of prices rising won’t necessarily lead to persistently high inflation. “Our policy is accommodative because unemployment is high and the labor market is far from maximum employment,” he told the House Financial Services Committee. It’s true that some asset prices are elevated by some measures, he said.

Senate Panel Starts Looking at Next Big Package

A Senate committee began consideration of President Joe Biden’s follow-on to the pandemic-relief bill: a major push on infrastructure. Separately, House Democrats released a new version of the aid bill that includes fresh spending items, adding to lawmakers’ task of reconciling the legislation with the US$1.889 trillion cap Congress set earlier this month.

Lockdown Boosted Savings, But BOE Doubts Much More Will be Spent

Bank of England policy makers are sounding a note of caution about how much excess savings built up during Covid-19 lockdowns will be spent once the economy reopens. The central bank’s Chief Economist Andy Haldane has estimated that as much as 250 billion pounds (US$352 billion) will accumulate in the accounts of consumers who were unable to go on holiday, shop or eat out as much as usual.

France’s Latest Plan to Save Businesses Has Europe Intrigued

Emmanuel Macron’s government is digging deep into its policy toolbox to find ways to transition the economy back to normality and fulfill the president’s pledge to support businesses and workers, “whatever the cost.” A plan being prepared in Paris would deploy state guarantees to back €20 billion (US$24 billion) of so-called participative loans.

New Zealand minister forces central bank to include housing in rate setting

New Zealand’s government will require the central bank to take account of the housing market when it sets monetary policy, a change the bank opposed. “The Reserve Bank is now required to consider the impact on housing when making monetary and financial policy decisions,” Finance Minister Grant Robertson said in a statement. Changes have been made to the bank’s Monetary Policy Committee’s remit requiring it to take into account government policy relating to more sustainable house prices.

India’s Recession Exit Gains Momentum on Services, Manufacturing

India’s economy looked ready to leave a sharp downturn behind in the new year, as business and consumer activity showed more signs of gathering momentum in January. Activity in India’s dominant services sector expanded for a fourth straight month in January. The Markit India Services Purchasing Managers’ Index came in at 52.8 from 52.3 a month earlier.

Oil Hits One-year High With Market Eyeing Tight Global Supplies

Oil surged to the highest in more than a year as the market looks ahead toward an accelerating decline in global inventories and a comeback in demand. Brent crude for April settlement climbed US$1.67 to US$67.04 per barrel.

Source: Affin Hwang Research - 25 Feb 2021