US stocks and government bonds rallied in response to Federal Reserve chief Jay Powell cementing expectations that the central bank will begin a slow removal of its crisis-era stimulus measures later this year.
The blue-chip S&P 500 index rose 0.9 per cent on Friday following a speech by Powell at a virtual Jackson Hole summit of central bankers earlier in the day, notching a further high following a moderate dip lower on Thursday. The Nasdaq Composite rose 1.2 per cent, also a record close, while big regionwide and national European bourses all ended higher.
Powell said the Fed had met the first of two goals it wanted to achieve, namely for average 2 per cent inflation, before reducing its economic support. The second goal is for maximum employment, with him saying there was “clear progress”.
However, Powell also warned against acting too hastily in response to elevated inflation, noting that such a move could be “particularly harmful” given the world’s largest economy was still fighting the effects of the pandemic.
Powell’s address had been at the centre of market attention, said Roger Lee, head of UK equity strategy at wealth manager Investec. “There is a reason we’re hanging on this — the market is desperate to get some direction, some confirmation from the Fed when tapering starts.”
US government debt prices also rose on Friday as Powell emphasised that efforts to taper the bond-buying programme would be separate from potential future increases to US interest rates.
The yield on the benchmark 10-year Treasury note edged down about 0.05 percentage points to 1.3 per cent while the two-year note, which is heavily influenced by the Fed’s interest rate policy, dropped to 0.22 per cent from 0.24 per cent, in a sign of investors paring back rate hike expectations.
“I was very happy that he separated raising rates from the taper announcement... It’s a much higher bar to raise rates,” said Kristina Hooper, chief global market strategist at Invesco.
In Europe, the Stoxx 600 closed up 0.4 per cent, with the continent-wide benchmark on track for its seventh consecutive month in the black. Frankfurt’s Xetra Dax was up 0.4 per cent, London’s FTSE 100 gained 0.3 per cent and the CAC 40 in Paris rose 0.2 per cent.
In Asia, Hong Kong’s Hang Seng index closed flat while its tech subsector edged down 0.2 per cent. Commodities rallied, with global benchmark Brent crude up 2.2 per cent to $72.61 a barrel while US marker West Texas Intermediate rose 1.9 per cent to $68.71 a barrel. Gold was trading up about 1.4 per cent at $1,821 a troy ounce.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50LzVhM2YwYzg3LTdlNDYtNGQ4ZC05MTU3LTZkODM5YzRiOGFlY9IBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50LzVhM2YwYzg3LTdlNDYtNGQ4ZC05MTU3LTZkODM5YzRiOGFlYw?oc=5
2021-08-27 20:36:39Z
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