FILE - In this Nov. 28, 2017, file photo, Jerome Powell, President Donald Trump's nominee for chairman of the Federal Reserve, testifies during a Senate Banking, Housing, and Urban Affairs Committee confirmation hearing on Capitol Hill in Washington. Federal Reserve Chairman Powell said Tuesday, Feb. 13, 2018, that the global economy is recovering strongly for the first time in a decade, but the central bank needs to remain alert to any emerging risks to financial stability. (AP Photo/Carolyn Kaster, File)
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Monday 21:00 GMT

What you need to know

  • US stocks extend last week’s rise as focus turns to new Fed chair’s comments
  • Treasury yields ease further below 2.9 per cent level
  • Dollar steady, euro off highs after Draghi speech
  • Sterling slips back below $1.40
  • China stocks undaunted by proposals to scrap presidential term limits

US equity and Treasury prices continued to gain ground while the dollar drifted as all eyes turned to the inaugural testimony by new Federal Reserve chair Jay Powell to the House Financial Services and Senate Banking Committees on Tuesday and Thursday, respectively.

“This is a pivotal week — a ‘get to know the new Fed chair week’,” said John Hardy, head of FX strategy at Saxo Bank.

“The backdrop ahead of chair Powell’s first major appearance is one of equity markets making an attempt at coming full circle from the massive volatility event earlier this month.”

Lee Hardman, currency analyst at MUFG, said market participants would be scrutinising his remarks closely to “stress test” the current consensus view that his appointment would not result in a marked policy shift.

“The latest comments from Fed officials have continued to support plans for a gradual tightening of monetary policy,” Mr Hardman said.

The latest push higher for the S&P 500 left the benchmark index nearly 10 per cent up from a four-month intraday low hit on February 9, but still about 3.3 per cent short of the record peak set a fortnight beforehand.

The 10-year US Treasury yield retreated further from last week’s four-year high above 2.95 per cent.

Meanwhile, the euro eased back from the day’s peak against the dollar of $1.2354 to trade just slightly higher after Mario Draghi, president of the European Central Bank, addressed the EU Parliament.

“Mr Draghi stuck to his view that continued [policy] accommodation was necessary, and this was enough to catch a few overeager euro bulls on the hop,” said Chris Beauchamp, chief market analyst at IG.

“Clearly, the ECB is in no rush at all to taper further.”

The focus is likely to shift from central bankers to European politics later in the week as participants position for Italy’s general election, and the German SPD vote on a Grand Coalition, both scheduled for Sunday. Italy’s 10-year government bond yield fell 4bp to 2.11 per cent.

Brent oil recovered more of the ground lost since it hit a three-year high late last month, while gold held within its recent range.

Equities

In New York, the S&P 500 rose a further 1.2 per cent to 2,779 after recording two successive weekly gains. The technology and telecoms sectors led the way higher.

The Nasdaq Composite index added 1.1 per cent, while the Dow Jones Industrial Average climbed 1.6 per cent.

Wall Street’s strength offered support to European bourses, with the pan-regional Stoxx 600 index rising 0.5 per cent. Frankfurt’s Xetra Dax ended 0.4 per cent higher while the FTSE 100 in London gained 0.6 per cent.

Chinese stocks were undaunted by news at the weekend that Beijing is poised to end the two-term limit for the presidency. The CSI 300 index of large-cap stocks listed in Shanghai and Shenzhen gained 1.2 per cent while Hong Kong’s Hang Seng rose 0.7 per cent.

Forex and fixed income

The euro was 0.1 per cent higher against the dollar at $1.2310 while sterling was barely changed at $1.3961, having earlier touched $1.4069. The single currency was up 0.2 per cent versus the pound at £0.8814.

The dollar was a shade firmer versus the yen at ¥106.91.

The 10-year US Treasury yield was down 1 basis point at 2.86 per cent, having earlier fallen to 2.83 per cent, while the two-year was 1bp lower at 2.23 per cent. The German 10-year Bund yield held steady at 0.66 per cent.

Commodities

Oil prices extended last week’s solid gains, with Brent, the international crude benchmark, settling at $67.50 a barrel, up 0.3 per cent. US West Texas Intermediate was up 0.7 per cent in late trade at $63.98.

Gold was up $4, or 0.3 per cent, at $1,333 an ounce.

Additional reporting by Michael Hunter in London and Hudson Lockett in Hong Kong

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