Stocks set to rally as bond yields dip, Powell to signal direction of rate hikes in the US

powell

A rally in Asian equities looked set to prolong  into a third week after US stocks posted strong gains and Treasury yields dipped with US monetary policy back in focus in a week that includes two appearances from Federal Reserve Chairman Jerome Powell. The yen dropped.

Futures in Japan, Australia and Hong Kong all signaled equities will rise when Monday trading starts after the S&P 500 Index rose 1.6 per cent Friday.

Powell will address the House Financial Services Committee tomorrow and the Senate Banking Committee two days later to give his Humphrey-Hawkins testimony.

Bond traders are pricing less than the three quarter-point rate hikes that Fed officials  havesignalled as likely this year.

While the slump in stocks at the start of February may have been in part fuelled by concerns tied to the 10-year yield approaching 3 per cent, many strategists have said they felt equities could continue to rise until reaching 3.5 per cent or 4 per cent.

President Donald Trump’s steel tariffs are also in focus, with US Steel surging in after-hours trading. Trump favours a 24 per cent tariff on steel imports, the most severe of the three options presented to him by the Commerce Department, people familiar said.

Elsewhere, Saudi Oil Minister Khalid Al-Falih said Opec and its allies may ease output curbs in 2019 to avoid creating instability. Bitcoin slid toward US$9,500.

Here are some key events scheduled for this week:

Bank of Korea’s policy decision and briefing on Tuesday. Powell testifies before a House panel tomorrow.

He’ll discuss the Fed’s Semi-Annual Monetary Policy Report and the state of the economy. Powell returns on March 1 before a Senate committee.

Companies announcing earnings this week include: Vale, BASF, Standard Chartered, Bayer, Lowe’s, Galaxy Entertainment Group, Anheuser-Busch InBev, Peugeot, WPP, and London Stock Exchange Group.

UK Prime Minister Theresa May delivers a speech on Britain’s relationship with the European Union after Brexit.

These are the main moves in markets:

Stocks

Futures on Japan’s Nikkei 225 Stock Average climbed 1.5 per cent in Chicago trading Friday. Futures on Australia’s S&P/ASX 200 Index added 0.5 per cent. Futures on Hong Kong’s Hang Seng Index gained 0.3 per cent. The S&P 500 rose 1.6 per cent on Friday.

Currencies

The euro was little changed at US$1.2292. The pound was flat at US$1.3977. The yen fell 0.2 per cent to 107.11 per dollar.

Bonds

The yield on 10-year Treasuries fell five basis points to 2.87 per cent on Friday. The two-year yield was flat at 2.24 per cent. Australia’s 10-year yield slid five basis points to 2.80 per cent.

Commodities

West Texas Intermediate crude advanced 1.2 per cent to US$63.55 a barrel on Friday. Gold futures declined 0.3 per cent to US$1,328.71 an ounce

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