Fed Chair Powell Pushes Back Against Negative Rates

Fed Chair Powell Pushes Back Against Negative Rates”

THE US dollar strengthened towards a three-week high on Thursday as stock markets weakened broadly after Federal Reserve chairman Jerome Powell dismissed speculation about negative interest rates.

China has reimposed movement restrictions near its borders with North Korea and Russian Federation after a new outbreak was detected there and South Korea was working to contain an outbreak centered around bars and nightclubs in Seoul.

Singapore's Straits Times Index was down 1.5 per cent at 10:42am local time.

European stock markets were down more than one per cent while United States stock futures indicated a negative start for Wall Street, pointing to a third consecutive session of losses and sending investors to the relative safety of the greenback.

"The issue is whether we get a second wave (of infections). that would be my greatest fear".

China has re-imposed movement restrictions near its borders with North Korea and Russian Federation after a new outbreak was detected there and South Korea is working to contain an outbreak centred around bars and nightclubs in Seoul.

In midday trading on Wall Street, the Dow Jones Industrial Average .DJI was up 45.64 points, or 0.2%, at 23,293.61, the S&P 500 .SPX lost 5.77 points, or 0.20%, to 2,814.23 and the Nasdaq Composite .IXIC dropped 53.39 points, or 0.6%, to 8,809.78.

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The Fed has nonetheless taken unprecedented action to combat the sharpest economic contraction of the post-World War II era, slashing interest rates to almost zero, announcing open-ended asset purchases and introducing lending programs to support the flow of credit to small businesses and households. Yields on benchmark U.S. 10-year Treasuries fell slightly to 0.6412 per cent.

A dip in US crude stockpiles helped push oil prices higher.

"While initial claims for unemployment benefits continue to retreat from their peak, they remain at levels consistent with a labor market in distress", said a note from economists at Oxford Economics.

"We're going to slowly open the economy", U.S. Treasury Secretary Steven Mnuchin told Fox News on Wednesday. Powell warned of a "highly uncertain" outlook for the world's top economy, adding that lawmakers might have to provide even more stimulus to the $3 trillion already stumped up.

Caution is also prevailing in Europe and the Antipodes, where restrictions are beginning to relax.

"A second pandemic wave is unfortunately not a tail risk, so the full extent of the economic damage may be underestimated", he said, recommending a long position in euro/kiwi which has gained almost 9 per cent this year as market volatility has increased. The dollar index =USD rose 0.27%, with the euro EUR= down 0.29% to $1.0785.

USA crude CLc1 recently rose 3.56% to $26.19 per barrel and Brent LCOc1 was at $30.33, up 3.91% on the day.

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