Global equities edge down, 10-year yields up with Fed in focus

US Federal Reserve Chairperson Jerome Powell. Photo: File

US Federal Reserve Chairperson Jerome Powell. Photo: File

Published Jul 9, 2024


MSCI's global equities index lost some ground on Tuesday and US Treasury yields ticked higher after US Federal Reserve Chairperson Jerome Powell said more good data would strengthen the case for rate cuts without giving a clear timeline.

Powell’s statement ahead of his appearance in Congress appeared to show increasing faith that inflation would return to the Fed’s target and pointed to risks to the job market and the economy if interest rates stay too high for too long.

But equities lost a little ground while Treasury yields rose as some investors had been hoping for clearer guidance at the start of the hearing scheduled for Tuesday and Wednesday.

“He’s beginning to tee up a rate cut. The question is exactly when. That’s something he’s not going to be able to answer. He says we need more data but we don’t know how much more,” said Brian Jacobsen, the chief economist at Annex Wealth Management in Brookfield, Wisconsin.

While Jacobsen wasn’t expecting any big changes from Powell, the comments may have been “a slight disappointment for people who were hoping he’d give greater clarity” about how much more data the Fed needs for confidence to cut rates, he said.

Traders are now baking in a 71.8% probability that the Fed’s first rate cut would come in September, up slightly from 71% on Monday, according to CME Group’s FedWatch tool.

At 5.22pm SA time, the Dow Jones Industrial Average was down 115.76 points, or 0.29%, at 39229.03, the S&P 500 gained 7.46 points, or 0.13%, to 5580.31 and the Nasdaq Composite was up 42.10 points, or 0.23%, to 18445.84.

MSCI's gauge of stocks across the globe fell 0.36 points, or 0.04%, to 817.78 while Europe’s STOXX 600 fell 1.01%.

Investors will also be watching US consumer price data due on Thursday for further signs of easing in inflation. Headline inflation for June is expected to slow to 3.1%, from 3.3% in May, with core inflation forecast steady at 3.4%.