What’s up in Markets: Powell Returns, China Sell-Off, Booking, Nvidia Earnings

Jerome Powell returns to Capitol Hill for another day of testimony, but he hasn’t calmed the bond markets entirely yet. China’s stocks sell off as Hong Kong signals a transaction tax hike. Booking and Nvidia report earnings and the U.S. government gives its data on U.S. oil inventories in the week that Texas froze.

Powell returns to Capitol Hill as yields fluctuate

U.S. bond yields fluctuated and the dollar resumed its downward drift overnight in the wake of Jerome Powell’s refusal to be panicked by the fluttering of inflation fears in global markets.

The Federal Reserve chairman returns to Capitol Hill at 10 AM ET (1500 GMT) to tell the House of Representatives what he told the Senate Banking Committee on Tuesday, namely that “the economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved.”

The comments had reassured markets that the Fed is making no plans to taper its bond purchases this year, but by 6:30 AM ET, the 10-Year Treasury note yield was back at 1.37%, well off an overnight low of 1.33% and seemingly set for a test of last week’s high of 1.40%

Chinese sell-off quickens as HK plans tax hike

A sell-off in Chinese stocks gathered momentum as concern over sky-high valuations reached Asia.

Mainland stock indices fell by between 1% and 2.5%, extending the losses made since the country returned from its week-long holiday to celebrate the New Year. Surging input prices for raw materials such as copper and steel have started to raise concerns about inflation there, too.

The sell-off was even worse in Hong Kong, where the Hang Seng index fell over 3% in response to news that the city is planning to raise stamp duty on stock transactions. That threatens to depress liquidity in the Hong Kong market, and marks a further step away from the regulatory regime that had made it an attractive venue in the past. Shares in the stock exchange operator Hong Kong Exchange and Clearing fell 8.8%.

Stocks set to open mixed; Booking, Nvidia eyed

U.S. stock markets are poised to open marginally higher, stabilizing after a volatile ride on Tuesday.

By 6:30 AM ET, Dow Jones futures were up 28 points, or less than 0.1%, while S&P 500 futures were up by a fraction more and NASDAQ Futures, which have underperformed in recent sessions, were flat.

Tuesday’s session had been rescued largely by fund manager Cathie Wood, who shored up both Tesla (NASDAQ:TSLA) and Bitcoin with an appearance on CNBC to say that her ARK family of funds had bought the dips in both. To skeptics, however, that only increases the concentration risk in some of the most popular actively-managed funds of the moment.

Stocks in focus later are likely to include Booking.com, whose quarterly update and outlook will be scanned for what it says about the willingness of Americans to embrace travel again, now that the peak of the pandemic appears to be past. Nvidia tops the bill after the close, with a report set to be characterized from sustained strength in demand from gamers and cryptocurrency miners. Lowe’s and TJX are also due to report.

Biden plans executive action on supply chains

U.S. President Joe Biden is to sign an executive order Wednesday decreeing a broad review of supply chains, with a view to reducing U.S. dependence on China.

The review will cover rare earth minerals and other key manufacturing inputs, including semiconductors, according to The Wall Street Journal

It is not intended to be a short-term fix for the chip shortage currently being experienced worldwide by automakers and others. However, semiconductors will be included in the review, along with pharmaceuticals and large-capacity batteries.

However, the move underlines the essential continuity of U.S. policy toward China since the new administration took over, despite the change in tone since the departure of Donald Trump.

Oil shakes off inventory worries; EIA eyed

Crude oil prices resumed their upward trend after Tuesday’s surprise announcement of an increase in U.S. crude and gasoline stocks.

The Energy Information Administration will release its weekly data at 10:30 AM ET (1530 GMT) as usual, with more attention than usual on how they tally against the American Petroleum Institute’s estimates after a week of major disruptions to supply and demand due to the cold snap in Texas.

The API said crude inventories had risen by over 1 million barrels last week, defying expectations of a 5 million barrel draw. Gasoline inventories also rose by some 66,000 barrels, instead of falling by 3 million barrels, as expected.

U.S. Crude prices were up 0.7% at $62.09 a barrel, while Brent futures were up 0.8% at $65.00.

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