Beijing: Global stock markets and Wall Street futures rose Thursday after the Federal Reserve said the US economy is moving toward lower inflation but more interest rate hikes are planned.
London and Frankfurt opened higher. Shanghai and Tokyo advanced. Oil prices rose.
Wall Street’s benchmark S&P 500 index rose after the Fed increased its key lending rate by 0.25 percentage points, smaller than previous hikes. Chair Jerome Powell said the “disinflationary process has started” but “ongoing increases” in rates will be needed.
Traders hope central banks that raised rates repeatedly over the past year will scale back plans for more hikes as inflation eases. Some expect a US cut before 2024, though Powell said he anticipates none this year.
Markets put a “dovish interpretation” on Powell’s comments despite his warning that it was too early to declare victory, said Venkateswaran Lavanya of Mizuho Bank in a report.
The gap between market pricing and Fed plans “appears to have widened,” Lavanya wrote. “This leaves room for a rude shock down the road.”
In early trading, the FTSE 100 in London rose 0.6 per cent to 7,808.83. The DAX in Frankfurt gained 1.4 per cent to 15,396.36 and the CAC 40 in Paris was up 1 per cent at 7,148.88.
On Wall Street, the S&P 500 future was up 0.4 per cent. That for the Dow Jones Industrial Average was off 0.1 per cent.
Wednesday, the S&P 500 gained 1 per cent after Powell’s news conference for its highest close in two months.
“We can now say, I think for the first time, that the disinflationary process has started,” Powell said. He said his “base case” is that the Fed’s inflation target of 2 per cent can be achieved “without a really significant downturn or really big increase in unemployment.”
That appeared to encourage investors who worry central banks might be willing to push the global economy into recession to cool inflation that is near multi-decade highs.
The Dow recovered from a loss to gain less than 0.1 per cent. The Nasdaq composite jumped 2 per cent.
Thursday, the Shanghai Composite Index gained less than 0.1 per cent to 3,285.67 and the Nikkei 225 in Tokyo added 0.2 per cent to 27,402.05. The Hang Seng in Hong Kong shed 0.5 per cent to 21,958.36.
The Kospi in Seoul was up 0.8 per cent at 2,466.03 and Sydney’s S&P-ASX 200 added 0.1 per cent to 7,511.60.
India’s Sensex shed less than 0.1 per cent to 59,664.17. New Zealand and Jakarta advanced while Singapore, Bangkok and Kuala Lumpur declined.
Wednesday’s announcement raised the Fed’s overnight lending rate to a 16-year high of 4.5 per cent to 4.75 per cent up from close to zero early last year.
Data Wednesday gave a mixed picture of the US Job market, a factor in inflation expectations.
Hiring is resilient despite repeated rate hikes. While that helps workers, it adds to worries that wage gains could add to upward pressure on prices.
Private payrolls rose by 106,000 in January, according to ADP, a payroll processor. That was a smaller gain than the previous month and below forecasts.
A separate US Government report indicated more strength. It said the number of job openings increased to 11 million in December, better than expected.
In energy markets, benchmark US Crude rose 42 cents to USD 76.83 cents to USD 77.07 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell USD 2.46 Wednesday to USD 76.41. Brent crude, the price basis for international oil trading, added 39 cents to USD 83.23 per barrel in London. It lost USD 2.62 the previous session to USD 82.84 a barrel.
The dollar was unchanged at 128.57 yen. The euro rose to USD 1.1001 from USD 1.0979.
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