Powell, Yellen Testify; AstraZeneca’s Vaccine, Housing Data – What’s up in Markets

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By Peter Nurse

Investing.com — Testimony from both Fed chief Jerome Powell and Treasury Secretary Janet Yellen to Congress is set to be the main focus of the markets Tuesday. Ahead of this, rising Covid-19 cases in Europe, resulting in Germany extending its mobility restrictions, are putting pressure on oil prices and equities. Turkish markets remain volatile after President Erdogan’s axing of the central bank governor for being too hawkish, while doubts about AstraZeneca’s vaccine reemerge. U.S. housing data are due for release, while U.K. employment data surprised on the upside. Here’s what you need to know in financial markets on Tuesday, March 23rd.

1. Powell and Yellen to face House questions

Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen are set to start their two-day testimony before Congress later Tuesday, in front of the House Financial Services Committee. They are set to discuss the health of the U.S. economy and the importance of fiscal and monetary stimulus in the recovery from the pandemic. 

Yields on U.S. Treasuries have climbed to their highest levels in more than a year as financial markets have bet on the U.S. economy making a quicker recovery from the damage caused by the pandemic than the central bank currently predicts. And the pair are likely to get plenty of questions from a deeply politically divided Congress about whether these yields will continue to rise amid fears the economy will overheat.

However, judging by released excerpts from his prepared testimony, Powell will reiterate the central bank’s plan to support the recovery “for as long as it takes” as the economy remains below pre-pandemic levels. In particular, the labor market remains a concern for the Federal Reserve, with the unemployment rate, and the labor participation rate still below pre-pandemic levels.

Yellen has said repeatedly over the past two months that the U.S. can afford to borrow more with interest rates historically low, and that while the debt level is large the cost to service those obligations is the same as it was in 2007.

2. AstraZeneca’s (NASDAQ:AZN) Covid-19 vaccine not yet fully cleared 

AstraZeneca’s executives must have felt they had finally caught a break on Monday, after data from a large U.S. trial showed its Covid-19 vaccine proved 79% effective overall and 100% effective preventing serious illness and hospitalization. 

However, this has proved a false dawn, after a U.S. health agency questioned Tuesday whether the U.K.-Swedish company provided a complete view of efficacy data on its vaccine from the trial, casting doubt on its plan to seek U.S. emergency use authorization for the vaccine in the coming weeks.

The Data Safety Monitoring Board “expressed concern that AstraZeneca PLC (LON:AZN) may have included outdated information from that trial, which may have provided an incomplete view of the efficacy data,” the U.S. National Institute of Allergy and Infectious Diseases said in a statement.

AstraZeneca’s vaccine has been dogged by doubts over its efficacy, dosing regimen and possible side effects. Many European countries, including Germany and France, halted use of the vaccine earlier this month after reports linked it to a rare blood clotting disorder.

3. US stocks set to open lower; Europe down on Covid woes

U.S. stock markets look set to open marginally lower Tuesday, amid cautious trading as investors await comments from Fed chief Powell and Treasury Secretary Yellen as they testify in front of Congress.

At 06:05 AM ET (1005 GMT), Dow Jones futures were down 150 points, or 0.5%, while S&P 500 futures were down 0.4% and Nasdaq 100 futures were down 0.2%.

Tuesday marks the one-year anniversary of the market’s nadir when the pandemic caused stocks to plummet. Since that intraday low, both the S&P 500 and Dow Jones Industrial Average have advanced 80%, while the Nasdaq Composite has gained over 90%.

These expected losses on Wall Street follow weakness in Europe, with European equities retreating from a one-year peak as a new wave of coronavirus cases and a lockdown extension in Germany raised fears of a slow economic recovery.

Additionally, Turkish stocks continued to fall, with the main index down 7%, after President Tayyip Erdogan abruptly fired the hawkish central bank governor at the weekend and installed a critic of the country’s tight monetary stance. The country’s currency, the lira, has also been volatile, but has made back some of Monday’s sharp losses.

4. U.S. housing data in focus; U.K. jobless rate falls

With the minutes from the last Federal Reserve meeting stating that the central bank will be studying actual economic data for monetary policy cues, focus will turn Tuesday to the release of the latest numbers from the housing market.

This sector had been one of the beneficiaries of the pandemic as large numbers sought the sanctuary of the suburbs, moving away from the high-density cities. However, things have started to cool – existing home sales on Monday showed a drop in the number of homebuyers who were listing their homes at this time.

New home sales data will be released at 10:00 AM ET (1400 GMT) and analysts expect the February numbers to show a 6.5% decline from the prior month. 

Earlier Tuesday, Britain’s jobless rate unexpectedly fell to 5.0% in the three months to January, when the country entered a new lockdown, below forecasts of a rise to 5.2%.

5. Oil hit by European coronavirus restrictions

Crude prices weakened Tuesday amid growing concerns that a flaring up of Covid-19 cases in Europe will slow a recovery in demand, particularly ahead of the summer tourism season.

At 6:10 AM ET (1010 GMT), U.S. crude futures were 3.5% lower at $59.42 a barrel, while Brent crude futures were down 3.5% at $62.37 a barrel.

Germany, Europe’s biggest oil consumer, on Monday extended its lockdown until April 18 and asked citizens to stay home during the Easter holiday period to try and combat a third wave of infections hitting the continent.

In a further blow for the tourism industry, fines of 5,000 pounds ($6,900) will be introduced for people from England who try to travel abroad before the end of June in a tightening of the country’s border controls.

On the supply side, the Organization of the Petroleum Exporting Countries and allies (OPEC+) will convene on April 1 to determine production policy for May. 

“The wobble in the market will give OPEC+ something to think about ahead of their meeting,” said analysts at ING, in a research note. “Clearly, prior to the recent downward pressure, expectations were that OPEC+ would start to ease cuts. However, the group may be more hesitant to do so now, particularly if sentiment does not shift ahead of the meeting. “

Ahead of that, U.S. crude inventory data from the industry body, the American Petroleum Institute, will be released later Tuesday.

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