Global shares drifted on Monday, consolidating gains after hitting a 14-month high last week, as investors awaited testimony from U.S. Federal Reserve Chair Jerome Powell in markets that remain dominated by monetary policy bets. The MSCI’s broad gauge of world stocks was steady (.MIWD00000PUS), with Wall Street markets closed for the Juneteenth holiday.
Investors await Powell’s two-day semiannual testimony to Congress on monetary policy for clues about the Fed’s future rate path after it eased its aggressive pace of rate hikes in December. His appearance before the Senate Banking Committee on Tuesday and the House Financial Services panel on Wednesday will allow investors to question Powell about the economic outlook and his rate-hike strategy.
Powell’s testimony comes amid a robust economic recovery in the United States and a growing risk that China’s slowdown will hurt global growth. The central bank has raised rates in three quarters this year and is widely expected to keep hiking, although it is unlikely to push rates up too fast to the point of choking off growth and stoking inflation.
In his testimony, Powell will face questions about the economy, its outlook for inflation, and the Fed’s policy direction so far this year. He will also be asked about his role as the central bank’s leader and how he views the President’s frequent public attacks on the Fed’s independence.
Powell has steadfastly defended the Fed’s independence from political pressure, arguing that the central bank must be free to make independent decisions on interest rates. The chairman will likely reiterate that message as he faces lawmakers this week.
While many investors were relieved that the Fed opted against an interest rate rise at its most recent meeting, investors will be looking for any signs from Powell about what the central bank is thinking about the current economy and inflation. In particular, Powell is likely to be asked if the Fed could go “even higher” with its rate increases than it has signaled to snuff out stubbornly high inflation.
Oil prices slid as traders worried about a possible loss of demand for the commodity amid soaring production in the Middle East. Brent crude futures dropped to $59.40 a barrel, down 0.2% from Friday’s high.
Investors are also waiting for more details from the U.S. government on how it plans to handle the resurgence of coronavirus infections, which has led to a sharp drop in school and workplace attendance nationwide. The resurgence has prompted some school districts to consider canceling summer classes.
Investors will also be eyeing speeches on rates this week from Federal Reserve Vice Chair Richard Clarida, who is due to speak on Tuesday, and Powell, who will deliver his congressional testimony on Wednesday. In Europe, the euro and the pound slipped against the dollar. The euro was down 0.2% to $1.1505, while the pound lost 0.4% to $1.2916.
