he fall-out from President Biden’s move to keep Jerome Powell at the helm of the US Federal Reserve continues to be felt after sharp moves for tech stocks, gold and bitcoin.
Wall Street responded to the White House’s plans for Powell’s re-appointment by betting that interest rates will rise as soon as next summer in order to bring inflation under control.
Tech stocks fell overnight as a result, while gold and bitcoin came under pressure after rising previously as a hedge againt inflation.
Oil prices will be closely watched today on speculation that Biden may announce the release of strategic reserves, possibly in conjunction with other nations in an effort to curb spiralling energy costs.
Tech stocks, gold and bitcoin lower
Tech shares saw increased volatility last night as Wall Street reacted to President Biden’s nomination of Jerome Powell for a second term as chairman of the US Federal Reserve.
Markets immediately priced in a first interest rate hike under Powell by June 2022, sending US bond yields higher and putting pressure on rate-sensitive technology stocks.
The tech-heavy Nasdaq closed 1.2% lower, but as the steeper yield curve benefited Wall Street banks the decline for the S&P 500 was limited to 0.3%.
Trading in gold weakened on expectations that Powell will now be more inclined to take a firmer hand on inflation, while there was a similar reaction for bitcoin after the crypto retreated to around $56,200 overnight.
Michael Hewson of CMC Markets said: “The reappointment of Powell signals a steady as she goes approach, sending US yields sharply higher, along with the US dollar, while gold prices plunged.”
He expects the FTSE 100 index to open 20 points lower at 7235, reflecting last night’s late reversal for US markets.
Energy prices are also being closely watched amid speculation that the US could today announce a release of oil from the Strategic Petroleum Reserve, potentially as part of a coordinated move with other nations.
Brent crude fell 0.9% to $79 a barrel, although the downside was limited by a warning from the Opec cartel and its allies that such a move could prompt them to reconsider their production plans when they meet next week.
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