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On Thursday, US stocks and Treasury yields saw an increase as Federal Reserve Chair Jay Powell warned that interest rates will need to be raised further in order to slow inflation to the targeted 2 percent.
The tech-heavy Nasdaq Composite of Wall Street rebounded after a three-day decline, adding 0.5 percent. However, the benchmark S&P 500 remained flat.
The yield on the two-year Treasury rose by 0.07 percentage points to 4.78 percent, while the yield on the 10-year note increased by the same amount to 3.8 percent. This rise in bond yields corresponds to a decrease in prices.
These developments occurred as Jay Powell testified before the Senate banking committee, confirming that the central bank is likely to pursue two more quarter-point rate increases by the end of the year.
New data from the US Department of Labor revealed that the number of new applications for unemployment aid remained unchanged from the previous week. This provides the Federal Reserve with more flexibility to raise rates.
Meanwhile, European equities were negatively impacted as several central banks raised interest rates above market expectations. This indicates that persistent inflation is keeping policymakers cautious.
Europe’s Stoxx 600 index ended the day 0.5 percent lower, while France’s CAC 40 and London’s FTSE 100 both dipped 0.8 percent.
The Bank of England surprised the market by raising its rate by 0.5 percentage points to 5 percent, after official data indicated higher-than-expected UK inflation.
The Swiss National Bank also increased its main policy rate by 0.25 percentage points to 1.75 percent, with the possibility of additional increases to stabilize prices in the medium term. Similarly, Norway’s central bank raised its key rate from 3.25 percent to 3.75 percent and suggested another increase in August.
Joel Kruger, market strategist at LMAX Group, commented on the situation, stating, “We are seeing a series of central bank decisions today that emphasize the ongoing threat of inflation and the seriousness with which it is being addressed. This may even come at the expense of growth, resulting in less favorable investor reactions from central banks worldwide.”
Additionally, Turkey’s central bank raised its benchmark one-week repo rate from 8.5 percent to 15 percent, taking a sharp departure from President Recep Tayyip Erdoğan’s low-rate policies. The market reaction was not as significant as expected, with the lira reaching another record low against the dollar, down 4.72 percent at 24.75.
Trading in Asia remained subdued as stock exchanges in China and Hong Kong were closed on Thursday and Friday due to the Dragon Boat Festival.
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