Stocks diverge on Powell nomination, Europe Covid fears

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Photo: iStock

US equities rose Monday as Federal Reserve chairman Jerome Powell was renominated for another term, but other stock markets wobbled as investors fretted over inflation and possible new pandemic lockdowns in Europe.

Stock prices on Wall Street opened higher after US President Joe Biden nominated Powell for a second four-year term.

The JSE's All Share Index was up 0.6%, with Barloworld up almost 8% after a special dividend was announced.

The rand was weaker at R15.75/$.

By mid-afternoon, stock prices in Paris gained 0.1 percent and prices in London were up 0.3 percent, while Frankfurt were showing a loss of 0.1 percent.

"There's been so much anxiety about inflation and interest rates that investors are clearly apprehensive about over-committing," said OANDA analyst Craig Erlam.

"And that anxiety has been exacerbated by the prospect of lockdowns in Europe, following Austria's announcement on Friday," he said.

On Friday, Austria surprised the markets by returning to a partial lockdown, not just for the unvaccinated as had been previously planned.

In Germany, outgoing Chancellor Angela Merkel warned that the country's current Covid curbs - including barring the unvaccinated from certain public spaces - "are not enough".

"European stocks slipped as Angela Merkel fanned concerns over the fourth wave of Covid in Europe," said ThinkMarkets analyst Fawad Razaqzada.

"The fear among market participant (is) that fresh lockdowns could be introduced in other parts of Europe, making the road to recovery from the pandemic even bumpier and raising concerns over the efficacy of the vaccines," Razaqzada said.

"So, there is now a real possibility we may see at least a short-term correction, as investors wake up to the risks facing the eurozone economy, after the major stock indices hit repeated all-time highs in recent weeks."

Analysts said Biden's decision to reappoint Powell as head of the Fed came as no real surprise.

Appointed by Biden's Republican predecessor Donald Trump and taking office in 2018, Powell has led the Fed's response to the massive pandemic downturn, which saw it slash its lending rate to zero and roll out trillions of dollars in liquidity.

A wealthy Republican with no formal economics training, Powell nonetheless won Biden's support for a second term.

"With inflation still running well above the central bank's target, traders will now turn their eyes to the December Fed meeting and whether the central bank will accelerate its tapering pace," said analyst Matt Weller.

"In any event, Powell's reappointment was always the market's 'base case' - though far from a done deal - so market movements have been relatively limited on the official announcement."

Earlier, Asian stock markets finished mixed as investors mulled Europe's new containment measures alongside growing speculation of interest rate hikes to tame spiking inflation.

Oil was flat, regaining some of its earlier losses after major consumers including the United States considered releasing some of their reserves to keep a lid on prices, which have been a key reason for elevated inflation this year.

Crude had tumbled Friday on fears of adverse demand fallout from the fast-moving Covid crisis.

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