United States
Jerome Powell is holding to a benign inflation outlook and did not hint at targeted intervention in the bond market, the latter feeding sizable losses on Thursday. The Dow Jones industrial average fell 1.1 percent while the S&P 500 fell 1.3 percent and the NASDAQ sank 2.1 percent.
Powell said inflation expectations, after decades of weak price growth, are not likely to shift suddenly higher, that expectations for low levels of inflation have become "deeply ingrained". And he repeated that expected price hikes at the end of the pandemic will likely be "one-time effects".
But it was the topic of interest rates that hurt the market: first, that he doesn't consider the ongoing sell-off to be disorderly; and second, he made no mention of another operation twist in which the Fed would increase its buying of long-term securities to help bring down long-term rates.
A jump in crude, tied to reports that OPEC+ is not seeking production increases, gave the oil patch a lift, including Exxon Mobil up 3.8 percent and Chevron up 0.8 percent. Losses later in the session were led by Home Depot, down 2.4 percent, and Walt Disney, down 2.2 percent.
In economic data, weekly jobless claims held onto the great bulk of the prior week's improvement, rising only 9,000 to 745,000 that pulled down the 4-week average by nearly 20,000 to 790,750 and a 3-month low. This report, like a sharp fall in Challenger's job-cut data also released Thursday, suggests that the worst of the churning for the US labor market may have passed.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil jumped $3.05 to US$67.12 while spot gold slipped US$12.82 to US$1,698.41. The US dollar rose sharply vs. major currencies. The US Treasury 30-year bond yield was up 5 basis points at 2.30 percent while the 10-year note yield rose 8 basis points to 1.54 percent.
Europe
European markets ended narrowly mixed Thursday, having closed just before comments from Jerome Powell began to pull US shares lower. The Europe-wide STOXX 600 fell 0.4 percent as did the FTSE 100, while the German DAX fell 0.2 percent and France's CAC was unchanged.
Shares pulled back after solid gains through the first three days of the week. Lufthansa slipped 0.7 percent after posting a record 2020 loss and cutting back 2021 capacity plans. Mining stocks were lower as Rio Tinto, down 7.7 percent, and BHP Group, down 5.8 percent, traded ex-dividend.
Eurozone retail sales were much weaker than expected in January, down 5.9 percent on the month in a decline that was far below expectations and the worst since last April in the midst of the first Covid wave. The result was 6.6 percent below the fourth-quarter average and significantly boosts the chances that sales will subtract from first-quarter GDP.
Unemployment data in the Eurozone, by contrast, was favorable, down 2 tenths in January to a better-than-expected 8.1 percent and only 7 tenths higher than a year ago, in what is testimony of the success of national support programs.
Asia Pacific
Rising global yields that tripped sharp Wednesday losses on Wall Street pulled Asian shares lower Thursday with Japan's Nikkei and China's Shanghai both down 2.1 percent and Hong Kong's Hang Seng down 2.2 percent.
Losses swept the region with shares of consumer goods and technologies down in Thursday's session. Regional investors are focusing on next week's annual parliamentary meeting in China which is set to unveil a new 5-year plan.
Australia's All Ordinaries fell 1.0 percent, not getting a lift from trade data where a 6.2 percent monthly rise in exports compared with a 2.3 percent decline in imports that reflected weakness in consumption goods.
South Korea's consumer price index rose 1.1 percent on the year in February, up from 0.6 percent in January but mostly as expected and still well below the Bank of Korea's 2.0 percent inflation target. Final GDP in South Korea was revised up 1 tenth to 1.2 percent quarter-over-quarter growth. The Kospi was down 1.3 percent on the session but still up 1.0 percent so far on the week.
Looking ahead*
On Friday, German manufacturers' orders will be released as will French merchandise trade, the UK Halifax house price index, and Italian retail sales. In North America, the US employment report, US international trade in goods and services, Canadian merchandise trade, and Canada' Ivey PMI will be posted. The Asian calendar is empty on Friday.
