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Stock and bond prices fell in the U.S. on Wednesday as the last minutes of the Federal Reserve reinforced fears of a possible retreat from crisis-era support measures in the event of continued economic recovery .
The Wall Street S&P 500 index moderated losses at the end of the trading day, but still closed 0.3% in New York, consolidating its third consecutive day of falls. The U.S. Treasury’s ten-year benchmark yield, which moves inversely to its price, rose sharply after posting minutes of the Federal Open Market Committee meeting to 1.68 percentage points.
Some investors and analysts attributed much of the market reaction to a phrase in the minutes that indicated that if the economy continued its rapid pace of recovery, the US central bank may begin to withdraw from the purchase of crisis-era bonds, introduced during the pandemic to help support financial markets.
“Several participants suggested that if the economy continued to move rapidly toward the committee’s goals, it may be appropriate at some point in the next few meetings to begin discussing a plan to adjust the pace of asset purchases.” the minutes dit.
However, some viewers tempered any expectations of an immediate policy change.
“It seems as if a growing number of relevant observers are recognizing the ‘substantial advances’ made in terms of the huge headwinds of the virus and the economic blockages over the past year,” said Bob Miller, head of fundamental fixed income at America in BlackRock.
“However, it remains to be seen what will cause this same kind of recognition by the Fed and, therefore, will end up motivating the recalibration of policies to more appropriate, but still very accommodating, environments for our economic conditions. current “.
Fed Chairman Jay Powell he insisted the central bank would maintain its ultra-accommodating stance until the U.S. labor market recovers from the pandemic.
“[But] the Fed can’t stay on the sidelines forever, “said Luca Paolini, chief strategist at Pictet Asset Management, before the minutes were published.” There is a danger that markets will start to see them behind the curve. ” they fear “a panic reaction that comes too late.”
The falls followed a weak session in Europe, where the Stoxx 600 across the region closed 1.5%, which was one of the biggest daily benchmark trips this year.
Paul Jackson, head of asset allocation research at Invesco, said investors were also looking for excuses to consolidate some gains after a stock market rally that began in March last year and a strong season of corporate benefits.
Europe’s Stoxx 600 has risen about 55% since mid-March 2020 and Wall Street’s S&P 500 has gained more than 80%.
“There’s already a lot of good news on the price and it’s getting harder and harder to see where the next catalyst for a new concentration is coming from,” Jackson said.
In foreign exchange, the dollar index rose higher against a basket of peers. The pound fell 0.5% to US $ 1.412 after Fed minutes and the euro fell 0.4% to $ 1.217.
Brent global oil crude, which briefly hit $ 70 a barrel on Tuesday only for the third time during the pandemic, fell more than 3 percent to $ 66.62 a barrel.
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