European Markets Lower After Fed Chair Powell Speech
05 Mar 2021 · 3rd Party Analysis
- European equities slide, following Powell’s remarks on the economy
- EU leaders grapple with vaccine shortage
European markets open to the downside Friday morning after Federal Reserve Chairman Jerome Powell attempted to reassure investors that monetary support will be maintained. The Fed chief’s focus remains on restoring employment as he vowed to keep policy loose while the bank is far from achieving its goals. However, no real hints of intervention from Chairman Powell were presented at the online event yesterday.
“We want to see labor market conditions consistent with our assessment of maximum employment. We want to see inflation sustainable at 2%. These are highly desirable outcomes that will represent an economy that’s very far along the road to recovery. We think we’re likely to see inflation move up during the year.” Chairman Powell said in his comments on the economy, labor market, inflation, and the central bank’s monetary policy stance.
Mr. Powell’s comments led to a sell-off in US equities which spread over the Asian and European market on Friday. European equities are down by more than 1% in the initial trading hours of the session as US futures suggest a negative open later today. Futures tied to the Nasdaq Composite point down by roughly 0.60%. Yesterday, the tech-heavy index saw the strongest selling wave that pushed it lower by 2.11%. The sell-off occurred more broadly across the US equity market as all benchmark indexes closed in the red.
Vaccine Deliveries: Italy Blocks Shipment
Elsewhere, EU leaders are racing to ramp up their vaccine drive as the bloc is trying to curb the virus spread through prolonged Covid-19 restrictions. German finance minister Olaf Schulz said Germany will need to increase debt spending this year to tackle the impact of the pandemic on Europe’s largest economy. Italy has blocked the shipment to Australia of 250,000 AstraZeneca vaccine doses amid a delivery shortage in the European Union. Earlier this year, AstraZeneca announced it will not be able to deliver the full amount of 80 million doses promised to the bloc for the first quarter. Instead, the pharmaceutical company said it could deliver about 40% of its target. Additionally, AstraZeneca has slashed its second-quarter target of 180 million to 90 million doses promised to the EU.
The move by Italy was met with disapproval by the Australian government but accepted by the European Commission. Earlier this year, the European Union introduced export controls on coronavirus vaccines made in the bloc to tackle delivery shortfalls. This is the first time such an export control mechanism has been used. According to Italy’s Prime Minister Mario Draghi, who took office last month, vaccines produced in the EU should stay in the EU.
The European Commission has criticized AstraZeneca multiple times over its failure to honor contractual obligations. The company has even been accused of diverting vaccines produced in the EU to countries outside of the bloc. AstraZeneca, which has produced the vaccine with the help of the University of Oxford, has denied the charges and blamed the shortage on production issues.