Stocks rise, dollar slips on Powell comments seen as dovish
(Adds closing US market prices)
US stocks get choppy trading after Powell’s comments
Aussie dollar lifted by hawkish RBA, yen rises on wages data
Oil jumps, Turkish stocks fall after devastating earthquake
NEW YORK/LONDON, Feb 7 (Reuters) – Global equities rose and the dollar fell on Tuesday, reversing earlier moves, as the market felt comments of the Federal Reserve chairman were good, even after he reiterated that the fight against inflation will require higher interest rates. and more time.
Powell said that disinflation has begun and that he expects a significant reduction in inflation this year, remarks that echoed what he said after last week’s policy meeting that many in the market thought the Fed chairman would he walks back.
Powell’s remarks at the Economic Club of Washington hope that investor hopes for a reduction in monetary tightening even as he reiterated that inflation will return to the Fed’s 2% target will take the time and it will not be painless.
“He seems to reiterate that fact that in his view inflation is increasing,” said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.
“That was the biggest fear for the participants in the market: that with all the increases in the rates, that in the view of the Fed no real progress is being made against inflation. And he is saying” no, it’s having its effect.”
Futures showed the Fed’s overnight lending rate peaked at 5.12% in the summer and later declined to 4.785% by December on expectations of a Fed rate cut as as the economy cools.
MSCI’s gauge of stock performance in 47 countries rose 0.95%, while earlier in Europe the broad STOXX 600 index closed up 0.23%, helped by some positive earnings reports .
The Treasury curve, recessionary bias when yields on two-year notes are higher than 10-year notes remained inverted at -79.2 basis points.
“The stock market is overvalued,” said Phil Orlando, chief equity strategist at Federated Hermes in New York, citing a slowing economy, rising corporate costs and lower profit margins.
“The Street hasn’t really figured this out in terms of what the implication is for the full year,” Orlando said. “You have the sword of Damocles hanging over the head of the market during a seasonal period where the market tends to struggle anyway.”
On Wall Street, the Dow Jones Industrial Average rose 0.78%, the S&P 500 gained 1.29% and the Nasdaq Composite added 1.9%.
In bond markets, benchmark government bond yields edged higher, with the 10-year German Bund trading at 2.361%, compared with less than 2% three weeks ago, and n -the benchmark 10-year Treasury note was at 3.687%.
The dollar index fell 0.21% from one-month highs, while the Japanese yen gained 1.21% to 131.08 per dollar after unusually strong Japanese wages data.
The Australian dollar rose 1.02% after its central bank reiterated that further increases would be needed.
Asian stocks steadied overnight after, like most global stock markets, suffering sharp losses following that US jobs data.
MSCI’s broadest index of Asia-Pacific shares outside Japan ended up 0.2%, but Australia’s S&P/ASX200 fell almost 0.5% after the Reserve Bank of Australia delivered its ninth consecutive rate increase. Australia’s cash rate is now at 3.35%, a ten-year high.
Another key move in the markets was oil’s second straight session jump on optimism over demand recovery from China and supply concerns following the shutdown of a major oil terminal. export after a big earthquake in Turkey.
Oil prices rose more than 3% after Powell eased market concerns about rate hikes, while recovering demand in China also boosted prices.
US crude futures rose $3.03 to settle at $77.14 a barrel, while Brent settled $2.70 at $83.69.
Gold gained, followed by a small pullback in the dollar, as investors weighed Powell’s comments and the prospects for the Fed’s rate hike policy.
US gold futures rose 0.3% to $1,884.80 an ounce.
(Reporting by Herbert Lash, additional reporting by Marc Jones in London, Scoot Murdoch in Sydney; Editing by Arun Koyyur, Nick Zieminski and Jonathan Oatis)