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Economy

Tech reboot lifts shares, dollar takes a breather

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Tech reboot lifts shares, dollar takes a breather
© Reuters. An electronic stock quotation board is displayed inside a conference hall in Tokyo, Japan November 1, 2021. REUTERS/Issei Kato

By Marc Jones

LONDON (Reuters) -A tech shares bounce carried European equities higher on Thursday, following similar gains on Wall Street and Asia and helped also by a small pullback in the dollar from a 17-month high.

With U.S. markets closed for Thanksgiving, focus was trained on Europe where a surge in COVID-19 cases is raising the prospect of lockdowns going into the Christmas shopping season.

Those concerns had knocked the pan-European index to a three-week low on Wednesday, but it was up almost half a percent early on as a 1% tech sector gain offset the eighth straight fall in travel and leisure stocks.

“We continue to treat every sell-off as the buy-the-dip opportunity,” said Marija Veitmane, global markets strategist at State Street (NYSE:) Global Markets, adding that firms’ earnings were still robust and that borrowing costs were still very low.

In the bond markets there was a small dip in German bund yields after Social Democrat and former finance minister Olaf Scholz struck a three-way coalition deal on Wednesday that will see him replace Angela Merkel at the helm of Europe’s largest economy.

It was the first dip in borrowing costs in three days. They have risen sharply this week as traders have ramped up bets that rising inflation will see the European Central Bank join the U.S. Federal Reserve in hiking interest rates next year. [GVD/EUR]

“The inflation debate, whether is it temporary or not, is still there,” said Dirk Schmacher, Head of European Macro Research at Natixis.

He also flagged the renewed lockdown in Austria and the fast rising case numbers in parts of Germany.

RELATIVE CALM

Emerging markets saw some relative calm after a turbulent few days that has seen battered again, Russia and Ukraine tensions rise, and Mexico’s president stoke worries about central bank independence by installing a virtual unknown at the helm. [EMRG/FRX]

The lira shrugged off early losses to rise 0.5%, extending Wednesday’s gains which came after a brutal 11-day, 24% losing streak after President Tayyip Erdogan had backed more interest rates cuts.

Russia’s rouble moved away from recent four-month lows, back above 75 per dollar, while recovered from a one-year trough.

In Asia, the tech recovery that had kicked off on the Nasdaq [.N] on Wednesday, lifted 0.8% and saw Hong Kong’s tech index snap six sessions of losses, with Alibaba (NYSE:) among the main winners.

Other share moves were more muted however. MSCI’s broadest index of Asia-Pacific shares outside Japan traded either side of flat all day, and was last 0.04% higher.

In broad terms, “when it comes to regional equities allocation, we’re watching the U.S. dollar which is making new highs and that is a headwind for emerging market equities,” said Fook-Hien Yap, senior investment strategist at Standard Chartered (OTC:) Bank wealth management.

The dollar is trading near its highest in almost five years versus the Japanese currency at 115.3 yen, and consolidating a near 18-month high against the euro which was a fraction higher at $1.1222. ()

Several U.S. Federal Reserve policymakers have said in recent days that they would be open to speeding up the tapering of the central bank’s bond-buying programme if the high rate of inflation held, and move more quickly to raise interest rates, minutes of the Fed’s Nov. 2-3 policy meeting showed.

“The market is now pricing in more than two hikes next year, but we think that is overly aggressive. We are only looking for about one hike next year,” said Yap.

These expectations have pushed U.S. treasury yields higher, albeit inconsistently, with benchmark 10-year notes last yielding 1.6427% having risen as high as 1.6930% on Wednesday.

U.S. Treasuries will not trade on Thursday because of the Thanksgiving holiday. U.S. stock markets will also be closed and will have a shortened session on Friday.

In other central bank news, the Bank of Korea raised its policy interest rate by 25 basis points on Thursday, as widely expected, as concern about rising household debt and inflation offset uncertainty around a resurgence in COVID-19 cases.

Oil prices see-sawed meanwhile after a turbulent few days in which the United States said it would release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain to try to cool oil prices after calls to OPEC+ to pump more went unheeded. However, investors questioned the programme’s effectiveness, leading to price gains.

was last at $82 a barrel, down 0.3%, while was at $78.12, also down 0.3%. [O/R]

edged 0.17% higher to 1791 an ounce.

(Additional reporting Saikat Chaterjee and Sujata Rao in London and Alun John in Hong Kong, Editing by Angus MacSwan)

Economy

Treasury’s Yellen: Biden stimulus at most a ‘small contributor’ to inflation

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Treasury's Yellen: Biden stimulus at most a 'small contributor' to inflation
© Reuters. FILE PHOTO: reasury Secretary Janet Yellen pauses while testifying before a Senate Banking Committee hybrid hearing on oversight of the Treasury Department and the Federal Reserve on Capitol Hill in Washington, U.S., November 30, 2021. REUTERS/Elizabeth F

By Andrea Shalal and David Lawder

WASHINGTON (Reuters) – U.S. President Joe Biden’s $1.9 trillion stimulus package in March contributed to stronger demand but is only a small factor in current higher rates of inflation, U.S. Treasury Secretary Janet Yellen told lawmakers on Wednesday.

Yellen told the House Financial Services Committee that the stimulus package clearly boosted demand but said it was not a “fair assumption” to say it overshot the need and fueled current spikes in inflation.

“It’s certainly true that the American Rescue Plan put money in people’s pockets … and contributed to strong demand in the U.S. economy, but if you look at the amount of inflation that we have, and its causes, that is at most a small contributor,” she said.

High inflation, now running at more than twice the Federal Reserve’s flexible target of 2% annually, is expected to ease in the second half of 2022, Fed Chair Jerome Powell told lawmakers at Wednesday’s hearing.

Yellen, grilled by Republican lawmakers about the inflationary impact of Biden’s response, insisted there was a “very good reason” to proceed with the stimulus package to deal with a shortage of demand that could have resulted in long-lasting joblessness and high unemployment.

“It’s been successful,” she said. “It did boost demand, and that is one of several factors that are involved in inflation.”

Yellen said the main driver of inflation was the COVID-19 pandemic and its impact in diverting demand away from services and “massively” toward goods, resulting in supply chain problems as well as a lasting effect on labor supply.

She said the pandemic had delivered an “unusual shock” to the workforce, and concerns about health issues were keeping many low-income workers from returning to their jobs, but that should recede as the pandemic was brought under control.

Biden’s plan for $1.75 trillion in further social and climate spending over the next decade was a small amount relative to the size of the U.S. economy, was paid for, and would lead to improvements that lowered deficits, Yellen said.

“It puts in place investments that will continue to bring down deficits,” she said. “It will improve the supply side of the economy, which is, in the long run, a factor that will tend to mitigate ongoing inflationary pressures.”

Yellen sparred for a second day with Republican lawmakers who cited a Congressional Budget Office estimate the “Build Back Better” legislation would add $367 billion to U.S. deficits over a decade.

She stuck to her argument that the CBO estimate does not include the effects of increased Internal Revenue Service enforcement, which the Biden administration has estimated would boost revenues by $400 billion over a decade.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Economy

Some Republicans in U.S. Congress try to close government over vaccine mandates

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Some Republicans in U.S. Congress try to close government over vaccine mandates
© Reuters. FILE PHOTO: The U.S. Capitol building is seen in Washington, U.S., November 16, 2021. REUTERS/Elizabeth Frantz/File Photo

By Susan Cornwell and David Morgan

WASHINGTON (Reuters) – U.S. lawmakers’ efforts to keep the U.S. government operating hit a stumbling block on Wednesday as a group of hard-line Republicans threatened to try to block any plan that allowed COVID-19 vaccine mandates to proceed.

Congress has until midnight on Friday to pass a measure continuing to fund federal government operations or face a partial shutdown during a pandemic that would be a political embarrassment to President Joe Biden’s Democrats, who narrowly control both chambers of Congress.

The hard-line Republican House Freedom Caucus called on Senate colleagues on Wednesday to vote against any measure, known as a “continuing resolution,” that would support Biden’s requirements that workers at federal contractors and large companies receive the COVID-19 vaccine.

“Use all procedural tools at your disposal to deny timely passage of the CR unless it prohibits funding – in all respects – for the vaccine mandates and enforcement thereof,” the group wrote in an open letter to top Senate Republican Mitch McConnell.

McConnell earlier in the week said he was confident that the measure funding the government would pass. House Republicans do not have enough votes to block legislation. But most legislation requires 60 votes to advance in the evenly divided 100-seat Senate, so Democrats would need support from at least 10 Senate Republicans to get to a vote on passage.

Democratic Senate Majority Leader Chuck Schumer told reporters talks with McConnell on funding the government were “making good progress”. He dismissed the Freedom Caucus’ threat.

“We’ll have total chaos,” Schumer said. “It’s up to the leaders on both sides to make sure that doesn’t happen.” Other lawmakers suggested one way to solve the problem would be to allow a separate vote on the vaccine mandates.

Negotiations between the two parties are focused on how long to continue to fund the government. Democrats want to extend current funding levels just until January and then pass new spending bills, while Republicans have urged a delay until later in the spring, a move that would leave spending at levels agreed to when Republican Donald Trump was president.

The Biden administration was blocked in court on Tuesday from enforcing two mandates requiring millions of American workers to get vaccinated against COVID-19, a key part of its strategy for controlling the spread of the coronavirus.

One federal judge temporarily blocked enforcement of a government mandate for healthcare workers. Another blocked the administration from enforcing a regulation that new government contracts must include clauses requiring that contractors’ employees get vaccinated.Democrats were indignant at the conservative Republicans’ demand. “I think we’re in the middle of a public-health crisis. And vaccine requirements are reasonable public-health measures at this particular point in time,” House Democratic Caucus Chairman Hakeem Jeffries told reporters.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Economy

Powell says Fed policy must address range of plausible outcomes

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Powell says Fed policy must address range of plausible outcomes
© Reuters. FILE PHOTO: Federal Reserve Chair Jerome Powell prepares to testify before a Senate Banking Committee hybrid hearing on oversight of the Treasury Department and the Federal Reserve on Capitol Hill in Washington, U.S., November 30, 2021. REUTERS/Elizabeth

By Jonnelle Marte and Lindsay (NYSE:) Dunsmuir

NEW YORK (Reuters) -With the U.S. economy growing strongly and supply-demand imbalances poised to persist in the near future, policymakers need to be ready to respond to the possibility that inflation may not recede in the second half of next year as expected, Federal Reserve Chair Jerome Powell said on Wednesday.

Powell, in his second day of testimony https://www.reuters.com/markets/us/powell-yellen-head-congress-inflation-variant-risks-rise-2021-11-30 in Congress, said policy will need to adapt as officials seek to bring millions of Americans back to work while also ensuring that the recent surge in inflation does not become entrenched.

“Almost all forecasters do expect that inflation will be coming down meaningfully in the second half of next year,” Powell said in a hearing before the U.S. House of Representatives Financial Services Committee. “The point is, we can’t act as though we are sure of that … We have to use our policy to address the range of plausible outcomes, not just the most likely one.”

Powell said the U.S. recovery is stronger than those of other major economies, thanks in part to more robust fiscal support. U.S. consumer spending surged in October and first-time applications for unemployment benefits are at a 52-year low, leading economists to raise their GDP growth estimates for the fourth quarter.

Still, consumer confidence dropped https://www.reuters.com/markets/us/us-consumer-confidence-ebbs-november-2021-11-30 to a nine-month low in November amid worries about the rising cost of living and pandemic fatigue. The new Omicron variant of COVID-19 is also creating more uncertainty for households and businesses.

Powell said Fed officials are monitoring the evolving economic landscape and acknowledged they might face “tension” as they pursue their dual mandate of achieving maximum employment and price stability.

“We have to balance those two goals when they are in tension, as they are right now,” Powell said. “But I assure you we will use our tools to make sure that this high inflation we are experiencing does not become entrenched.”

While wages are rising, particularly for low-wage workers, the increases are not happening at a pace that could spark higher inflation, the U.S. central bank chief said.

“We have seen wages moving up significantly,” Powell said. “We don’t see them moving up at a troubling rate that would tend to spark higher inflation, but that’s something we’re watching very carefully.”

On Tuesday, Powell told the U.S. Senate Banking Committee that Fed policymakers would discuss at their Dec. 14-15 meeting whether to end their bond-buying program a few months earlier than had been anticipated.

Last month, the Fed began reducing its purchases of Treasuries and mortgage-backed securities from $120 billion per month at a pace that would put it on track to complete the wind-down by mid-2022. The program was introduced in early 2020 to help nurse the economy through the pandemic.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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