The yen strengthened after the Bank of Japan reduced longer dated bond purchases.
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The Toronto Stock Exchange’s S&P/TSX composite index was down 43.51 points to 15,671.15, led by losses in the materials, metals and bullion sectors. What’s more, even as the 1-year Treasury yield increased in response to Chairman Powell’s remarks, long-term interest rates sank, flattening the yield curve. However, a decline on U.S. stocks was seen as well.
On inflation and interest rates: Powell said that he expects inflation to rise this year and stabilize around the Fed’s 2 percent annual target rate “over the medium term”, adding that “wages should increase at a faster pace as well”.
The Fed “will continue to strike a balance between avoiding an overheated economy” and allowing inflation to tick up toward the Federal Reserve’s 2 percent target, Powell said. “The surprises, if we are going to see them, are going to be after more data comes out in the next month or two”, and accounts for things like the tax cuts and whether business investment spending continues higher, he said.
“If you look at the worst performing stocks in Canada today they’re all gold stocks”.
Chinese and Hong Kong stocks tumbled. The trade-weighted index declined to 74.40 from 74.61 yesterday. A stronger dollar makes the commodity more expensive for holders of other currencies.
Elsewhere, the United Kingdom pound was flat after the European Union published a draft Brexit treaty, squaring off with Prime Minister Theresa May. Japan capital spending is out on Thursday.
Palladium lost 2.3 per cent at US$1,036.97 per ounce while platinum fell 1.5 per cent at US$984.40 hitting near a two-week low of US$976. It hovered near a recent 1-1/2 month top against the Australian dollar and held near a three-week high on the euro at $1.2221.
The Bloomberg Dollar Spot Index was little changed. The Japanese yen weakened 0.49pc versus the greenback to 107.47 per dollar. The euro was steady at $1.2225. The SPX dropped during Powell’s testimony, while the VIX and the 10-year Treasury yield spiked. Powell acknowledged the trend, but said that he believes sluggish price increases were due in part to temporary factors and that inflation would gradually rise this year.
Yields on 10-year government bonds were at 7.74% compared to Wednesday’s close of 7.726%.
The April crude contract was down US$1.37 to US$61.64 per barrel after a report showed that the amount of oil in American inventories rose more than analysts expected last week.
The dollar index is still down 1.5 percent this year, dogged by suspicions that the Trump administration prefers a weaker dollar to mend its bulging trade deficit, and worries its big tax cuts and spending plans may boost fiscal deficits to an extent that they undermine confidence in US debt.
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Follow Fin24 on Twitter, Facebook, Google+ and Pinterest.24.com encourages commentary submitted via MyNews24. LME copper fell 0.2% to $7 010 per metric tonne.
