European stock exchanges move around parity pending the testimony of the Fed’s number one, Jerome Powell, in the Chamber, scheduled for the Italian evening. In fact, as is customary, the drafts of the speech have already been made known overnight and the central banker has tried to allay fears of an anticipated monetary tightening, pointing out that the Fed will do whatever it takes to support the US economy until the The recovery will not be complete.After the US central bank announced last Wednesday that the possible hike in US rates would be brought forward to 2022 compared to the previously estimated 2023, the markets are now trying to adjust to the new scenario. The week began with a positive session on Monday 21 June and a sharp rise on Wall Street, so Asian stock exchanges also moved into positive territory.
In Milan, focus on Generali, which after the takeover bid on Cattolica has moved again in M&A, strengthening itself in Malaysia.
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Tokyo rebounds after crash, Nikkei up 3%
The Tokyo stock market closed with a sharp rise, bouncing after the crash on Monday 21 June caused by fears related to the future moves by the Fed. At the end of the session, the Nikkei Index recorded a gain of 3.1% reaching 28,884, 13 points, ending near the highs of the day. The broader Topix index also recovered sharply, with a 3.06% gain to close at 1,957.56 points.
Focus on the Fed
The focus of the markets, as mentioned, is on the Fed. Having anticipated the possible rate hike to 2022 suggests that the American central bank could also anticipate the reduction of monetary stimuli launched during the pandemic emergency. Currently the Fed buys (by printing money) 80 billion of government bonds and 40 billion of bonds linked to US mortgages every month, for a total of 120 billion of liquidity injected into the market every month.
This pace, in a context of strong economic recovery and inflationary flare-ups, has become excessive according to many Fed members. For now, the Fed has not started talking about the withdrawal of these stimuli, but the market expects it to announce something between August and September to start reducing purchases gradually in 2022. Starting with mortgage-bonds.