Powell’s Pro-Inflationary Comments Sent Ripples across the World

According to the ADP National Employment Report, U.S. Private payrolls jumped 242,000 in February, compared to 106,000 in January. Large employers added 160,000 jobs, medium businesses gained 148,000 jobs, while small establishments continued losing jobs, shedding 61,000 in February.

Meanwhile, U.S. equities nosedived yesterday as U.S. Fed Chairman Jerome Powell proclaimed interest rates may need to go up faster and higher than expected in order to bring down inflation (more below). Powell’s comments to Congress sent the Dow, S&P 500, and Nasdaq down more than 1%, and drove the yield on the two-year Treasury note up above 5% for the first time since 2007.

It was a broad-based selloff, with almost every stock in the Dow Jones finishing in the red. Bank stocks tumbled, with shares of Goldman Sachs (GS) and JPMorgan Chase (JPM) losing 3%. Smaller banks were especially hard hit, dominating the list of worst-performing stocks in the S&P 500.

Powell delivered the first of his two days of semi-annual testimony to Congress yesterday, speaking before the Senate Banking Committee ahead of today’s appearance before the House Financial Services Committee. In his prepared testimony released yesterday, Powell spoke of a sustained central bank campaign to curb stubborn inflation.

"The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated," Powell said. "If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes."

Answering questions from lawmakers, Powell said the full impacts of the Fed's interest rate increases haven't yet been felt in the economy.

European stock indexes are trading in the red as of 4:00 p.m. CET with yesterday's comments by the chair of the Federal Reserve apparently affecting market sentiment. After assessing the latest German data and an earnings report by Adidas (ADS.DE), traders will shift their attention toward another report on Q4 2022 Eurozone growth.

The German DAX reversed its earlier decline moving higher 0.32% at the time of writing with Symrise falling 3.77%. The British FTSE 100 is 0.20% higher as Ocado (OCDO.L) lost 0.44%. The French CAC 40, meanwhile, is still contracting by 0.10% concurrently. Worldline (WLN.PA) was down 1.28% at 3:55 p.m. CET. The Euro Stoxx 600 is trading nearly unchanged at the time of writing.

In Asia, China has unveiled plans for a sweeping central government reorganization at its annual parliament session, including the formation of a financial regulatory body and national data bureau and a revamp of its science and technology ministry.