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Jay Powell, the Federal Reserve chair, triggered a sudden sell-off in long-term US Treasury debt and equities after he vowed to keep monetary policy loose even as the economy improves and inflation begins to rise.
Speaking on Thursday afternoon, Powell said the central bank expected to be “patient” in withdrawing support for the recovery, given that the labour market remained far from the central bank’s goal of full employment and had made little progress in recent months.
With such a dovish tone, Powell failed to alleviate fears that the central bank is reacting too slowly to the recent rise in inflation expectations and long-term Treasury yields. The yield on the 10-year US Treasury note climbed as high as 1.54 per cent, up 0.05 percentage points from the previous day and continuing a sharp rise that has spread to debt issued by other nations.
In equity markets, the benchmark S&P 500 index extended recent losses, wiping out its gains for the year so far, with a fall of as much as 1.7 per cent. The technology-focused Nasdaq Composite slid by 2.4 per cent.
The Fed chair suggested that although central bank officials were closely watching the market movements, it would take much more to perturb them.
“As it relates to the bond market, I’d be concerned by disorderly conditions in markets or by a persistent tightening in financial conditions broadly that threatens the achievement of our goals,” Powell said. (FT)
Italy has blocked a shipment of the Oxford/AstraZeneca Covid-19 vaccine to Australia after the EU introduced rules governing the shipment of vaccines outside the bloc. Germany, meanwhile, approved the Oxford/AstraZeneca Covid-19 jab for people aged 65 and over.
Kamala Harris broke a tie in the US Senate after the upper chamber of Congress split along party lines over whether to proceed with a debate on Joe Biden’s $1.9tn coronavirus relief package.
After a six-week decline, more infectious variants of Covid-19 have pushed infection rates up across Europe according to the World Health Organization.
Nine out of 10 coronavirus deaths have occurred in countries with high obesity levels, according to WHO-backed research.
Few professional athletes who contracted Covid-19 and returned to play have developed inflammatory heart disease according to a new peer-reviewed study
A surge in poverty and unemployment in Latin America caused by the coronavirus pandemic threatens to set the region back by more than a decade, a UN agency warned.
Rishi Sunak defended the UK government’s decision to increase corporation tax for the first time since 1974.
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In the news
Calls for diplomatic intervention in Myanmar grow louder The UN said Wednesday was the bloodiest day in Myanmar since last month’s overthrow of Aung San Suu Kyi’s civilian government, after 38 civilians were killed. The US added several of the country’s ministries to a trade blacklist on Thursday. (FT)
Oil jumps as Opec and allies decide against big rise in output Opec and Russia decided against unleashing a flood of crude on to the market after Saudi Arabia urged fellow oil producers to “keep our powder dry” in the face of persistent uncertainty linked to the pandemic. (FT)
Hong Kong dropped from economic freedom index Hong Kong has been dropped from a prominent index of the world’s freest economies, underlining growing concerns over Beijing’s tightening grip on the Asian financial centre after it introduced a national security law last year. (FT)
SoftBank-backed Z Holdings seeks mega-deal The newly formed internet group wants to create a south-east Asian rival to US and Chinese social media giants. “We will be looking for opportunities to acquire an epoch-making global service,” Kentaro Kawabe, co-chief executive of Z Holdings, told the Financial Times. (FT)
EU set to bring antitrust charges against Apple The EU will act on a Spotify complaint that Apple was taking a 30 per cent cut of its subscription fees, which allowed its competitor Apple Music to undercut on price. Recent antitrust probes have put more pressure on the iPhone maker to change the way it runs its App Store. (FT)
Apollo bets on Las Vegas comeback Las Vegas Sands has agreed to sell the operations and real estate of the Venetian resort and casino for $6.25bn, just over a month after the death of the gambling company’s controversial founder, Sheldon Adelson. Apollo, the US private equity group, is set to run the resort on the Las Vegas Strip. (FT)
The days ahead
China’s National People’s Congress The annual meeting is set to focus on stability and rising debt as a path to the country’s post-Covid recovery. (FT)
US unemployment data The non-farm payrolls report is expected to show the US economy added 182,000 jobs and the unemployment rate held steady at 6.3 per cent in February. Data released on Thursday showed new claims for unemployment rose in the week ending February 27.
Fed officials are concerned that the unemployment rate understates the deterioration in labour market, as it does not account for those who have left the labour force. (FT)
Pope Francis makes historic trip to Iraq Pope Francis will become the first pope to visit Iraq on Friday. The 3-day visit will begin at the presidential palace in Baghdad before moving to Najaf on Saturday and Erbil and Mosul on Sunday. (Vatican News)
Did you keep up with the news this week? Take our quiz. Zoom’s shares rose as much as what percentage in after-market trading on Monday? 6 per cent, 10 per cent or 20 per cent.
What else we’re reading
US vs China In the first weeks of his presidency, Joe Biden has been eager to deliver a central message when it comes to China: he will not be a pushover. The administration believes it can craft a much more effective strategy for dealing with Beijing by forging common ground with US allies and partners. (FT)
Flash rally in Bank of Japan shares leaves brokers perplexed Shares in the Bank of Japan are notoriously illiquid and offer no dividend, yet they’ve risen more than 90 per cent in the past week. Leo Lewis explains some of the leading theories. (FT)
Pandemics and the paradox of progress The more humans tip the world into disequilibrium, through deforestation, the destruction of biodiversity and the raising of atmospheric temperatures, the more threat to us pathogens will pose, writes David Pilling. (FT)
What independence movements teach us about belonging Independence movements can push people who hold multiple identities to choose a single one. Simon Kuper argues that the best thing for society may be staying away from identity politics all together. (FT)
Reinvention of the in-house lawyer Demand is increasing for in-house lawyers who understand how to use technology to provide companies with better legal strategies and services. Enter the digital general counsel. This is the latest part of our series on how the legal profession is responding to digital transformation. (FT)
Podcast of the day
Italy’s make or break moment Italy’s new prime minister Mario Draghi has a “once in a generation mission,” according to one of his predecessors. In an interview with the FT’s Europe editor Ben Hall, Enrico Letta says how the former European Central Bank chief decides to spend up to €200bn in grants and loans from the EU recovery fund will be crucial.
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