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Fed's Powell reiterates prospect of rate cuts, but patience needed - ECB in focus

In his regular testimony on Capitol Hill, Federal Reserve Chairman Jerome Powell reiterated that monetary policy is expected to ease later this year. However, capital markets may need to remain patient. It must first be confirmed that inflation is falling in a sustainable manner. The European Central Bank's (ECB) monetary policy decision is now eagerly awaited this afternoon. 

Alessandro Fezzi, LGT
Reading time
5 minutes
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US Federal Reserve Chairman Jerome Powell told the House Banking Committee that interest rates could be eased later this year, but stressed that a turnaround was not imminent. The Fed would first need to see further and clear signs of a sustained decline in inflation. Investors currently expect the first easing of monetary policy in the middle of the year. Meanwhile, US labour market service provider ADP reported that the US private sector added fewer jobs than expected in February. Compared to the previous month, employment rose by 140,000 jobs. Analysts had expected an average gain of 150,000. According to ADP, employment growth remains solid. The focus is now on the official jobs report, which is expected on Friday.

The ECB is not expected to make an immediate decision on interest rates at today's meeting, but investors are hoping for new clues as to when the central bank might begin to turn the tide on rates. Markets expect the first rate cut to come in June. Comments from ECB President Christine Lagarde will therefore be closely watched.

On the New York Stock Exchange, stock indexes rebounded after two days of losses. The Dow Jones Industrial closed 0.2% higher at 38,661.05 and the broader S&P 500 was up 0.5% at 5,104.76. The Nasdaq index was up just under 0.7% yesterday. Meanwhile, in the bond market, US Treasury prices rose slightly. The yield on ten-year Treasuries fell to 4.11%.

On the political front, the likelihood of a "rematch" between US President Joe Biden and former President Donald Trump in November has increased following Republican Nikki Haley's announcement that she is ending her campaign.

In Tokyo, the Nikkei 225 fell around 1.2% from its previous record highs. The broader Topix was down 0.2%. South Korea's Kospi extended earlier gains, rising 0.3%, while the Kosdaq lost 0.8%. Australia's S&P/ASX 200 rose 0.4% to a new high. China's CSI 300 index fell 0.5%, while Hong Kong's Hang Seng index lost just under 0.5%. According to official data, China's US dollar-denominated exports rose 7.1% year-on-year in the first two months of the year. This was well above expectations. Meanwhile, the head of China's central bank, Pan Gongsheng, stressed that there was room for further cuts in banks' reserve requirements.

Corporate news in focus: Q4 results from Hugo Boss, Merck KGaA, Lufthansa, Continental, Aviva, Vivendi and Costco.

Economic data in focus: China trade balance, Swiss unemployment rate, ECB rate decision and press conference (from 13:45 CET), US trade balance and weekly jobs data.


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Lten steht Ihnen ein Berater der Bank gerne zur Verfügung.

Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi
Quelle: LGT Bank (Schweiz) AG

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