US equities dipped at the open on Tuesday ahead of a public appearance by Federal Reserve chair Jay Powell, when he is expected to address the implications of last week’s blockbuster US jobs report.
The benchmark S&P 500 fell 0.2 per cent while the tech-heavy Nasdaq lost 0.3 per cent. The greenback inched upwards by 0.15 per cent, while the yield on the US 10-year Treasury government nudged up 0.01 percentage points to 3.64 per cent.
Investors are weighing whether the Fed will temper market optimism for interest rate cuts later in the year. Data from the jobs report was far stronger than investors expected, raising market concerns that it could lead to a higher peak in US interest rates. American government bonds and equities have sold off since the data was released. Powell is due to speak at 5pm London time.
“All eyes will be on Fed chair Powell’s interview today at the Economic Club of Washington, DC . . . Clearly any implication that there are upside risks to the Fed’s rate outlook would validate the shift in market pricing over the last couple of days,” said Deutsche Bank analysts in a note.
Market-watchers are also eyeing the release of the consumer price index, as well as industrial and retail data next week.
“Markets are in a holding pattern right now. We know that retail is strong, but what will CPI and industrial look like?” said Steven Blitz chief US economist at TS Lombard.
European stock markets paused from two days of selling and the dollar dipped slightly against other currencies on Tuesday as investors awaited comments from the Federal Reserve chair on the outlook for US interest rates.
Europe’s benchmark Stoxx 600 index was down 0.1 per cent by mid-afternoon.
Indicating investors’ uncertainty, the Dax in Germany, which has been up 9 per cent this year, was down by 0.4 per cent by mid-afternoon.
The FTSE 100 was a standout performer, up 0.7 per cent after strong earnings from oil major BP.
On commodities markets the Brent international benchmark was up 1.4 per cent and WTI, the US benchmark, rose 1.7 per cent after the earthquake in Turkey shut down a big export terminal.
German industrial output slumped, falling 3.1 per cent against expectations of a contraction of 0.7 per cent. After taking into account revisions to October’s data, output is now 5.5 per cent below its level just before Russia’s invasion of Ukraine last February, according to Capital Economics.
“December’s drop could be an initial sign that, after being fairly resilient throughout last year, German industry is finally suffering the full force of the energy crisis,” said the research company.
Meanwhile, Asian stocks rose, with the Chinese CSI 300 rising 0.2 per cent. Hong Kong’s Hang Seng index closed 0.4 per cent higher.