GLOBAL MARKETS-Wall Street, U.S. Treasury yields gain on Powell nomination

BY Reuters | ECONOMIC | 11/22/21 03:26 PM EST

(Updates prices throughout, adds market commentary)

By Chris Prentice and Saikat Chatterjee

WASHINGTON/LONDON, Nov 22 (Reuters) - Wall Street touched records and two-year treasury yields hit a pandemic high on Monday after U.S. President Joe Biden tapped Jerome Powell to continue as Federal Reserve chair, while European shares were under pressure from coronavirus fears.

The S&P 500 and Nasdaq Composite touched all-time highs after Biden nominated Powell as chair and Lael Brainard, the other top candidate for the job, as vice chair.

With less than an hour remaining in U.S. trading, the Dow Jones Industrial Average rose 0.86%, to 35,907.13, the S&P 500 gained 0.64% to 4,728.26 and the Nasdaq Composite dropped 0.09% to 16,043.30.

Powell's current term has proven positive for risk assets, with the S&P gaining 69.7% since his appointment.

"The nominations signal continuity for policy at a critical time for the economy," said Arthur Hogan, chief market strategist at National Securities in New York. "The market hates surprises and not selecting Jay Powell would have been a big one."

The U.S. dollar rose 0.49% against a basket of other major currencies.

The pan-European STOXX 600 index finished flat after falling earlier in the day when German Chancellor Angela Merkel said Europe's biggest economy needed tighter restrictions to control a wave of COVID-19 inflections. MSCI gauge of European shares fell 0.65% as traders weighed the likely impact of fresh European COVID-19 restrictions on economic prospects.

"The growth story remains intact for the United States," said Edward Moya, senior market analyst at brokerage OANDA. Europe's "growth potential is being derailed by COVID right now. You're seeing flows back to the United States as a result."

French health authorities reported 5,266 daily new COVID-19 infections on Monday, pushing the seven-day moving average of new cases to an almost three-month high.

Austria powered down public life on Monday as its fourth national COVID-19 lockdown began, the first in a western European country.

High frequency data has already shown the European economy struggling to gain traction relative to its U.S. counterpart.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.11%.

The euro fell 0.57% and touched a more than 16-month low. The common currency has been the prime mover in markets over recent sessions as investors bet that Europe's economy will lag the U.S. recovery.

U.S. Treasury yields rose, with the two-year yield, which typically moves in step with interest rate expectations, hitting its highest level since early March 2020.

Fed Vice Chair Richard Clarida said last week that quickening the pace of tapering might be worth discussing at December's meeting. Minutes of the Fed's November meeting are due for release on Wednesday.

In commodities, gold prices were under pressure as Powell's nomination drove expectations that the central bank will stay the course on tapering economic support. U.S. gold futures settled 2.4% lower at $1,806.30. [O/R

Oil prices rebounded from recent losses, on reports that OPEC+ could adjust plans to raise oil production if large consuming countries release crude from their reserves or if the coronavirus pandemic dampens demand.

Brent crude settled up 1.03% at $79.70 a barrel and U.S. crude finished up 1.07% to $76.75 per barrel.

"The Biden administration is serious about tackling inflation and we're not going to have runaway inflation kill the U.S. economy," OANDA's Moya said, citing the expected tapping of strategic petroleum reserves.

Bitcoin dropped 4.2%, extending its rout after posting its worst week in two months last week.

(Reporting by Chris Prentice in Washington and Saikat Chatterjee in London; Editing by Catherine Evans, Alexander Smith and Dan Grebler)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.