Traders are hoping that central banks, which have repeatedly hiked rates over the past year, will scale back their plans for further rate hikes as inflation eases. Some expect a US cut before 2024, although Powell said he doesn’t expect any this year.
Markets interpreted Powell’s comments as “dovish” despite his warning that it was too early to announce victory, Mizuho Bank’s Venkateswaran Lavanya said in a report.
The gap between market prices and Fed plans “appears to have widened,” Lavanya wrote. “That leaves room for a nasty shock down the road.”
“We can now, I think for the first time, say that the disinflationary process has started,” Powell said. He said his “base case” is that the Fed’s 2% inflation target can be met “without a really significant slowdown or a really big rise in unemployment.”
This seemed to hearten investors who fear central banks may be poised to push the global economy into recession in a bid to cool inflation, which is near multi-decade highs.
On Wednesday, the S&P 500 gained 1% after Powell’s news conference. The Dow rebounded from a loss to gain less than 0.1%. The Nasdaq Composite rose 2%.
Thursday brings another batch of corporate earnings reports, with tech heavyweights Alphabet, Amazon and Apple releasing results after the bell. Ford and Starbucks are also reporting.
Also next Thursday is the weekly unemployment report, which follows stronger jobs data. The government said Wednesday that US job vacancies rose to 11 million in December, about two jobs for every unemployed American. On Friday, the government will publish its jobs report for January.
Markets in Europe moved higher ahead of the European Central Bank’s expected half-point rate hike early Thursday. At midday, the FTSE 100 in London was up 0.6%, the DAX in Frankfurt was up 1.2% and the CAC 40 in Paris was up 0.2%.
The Bank of England raised interest rates by half a percentage point on Thursday in a bid to tame double-digit inflation that is fueling a cost-of-living crisis, public sector strikes and recession fears.
In Asia, the Shanghai Composite Index rose less than 0.1% to 3,285.67 on Thursday and Tokyo’s Nikkei 225 rose 0.2% to 27,402.05. Hong Kong’s Hang Seng lost 0.5% to 21,958.36.
Seoul’s Kospi rose 0.8% to 2,466.03 and Sydney’s S&P ASX 200 rose 0.1% to 7,511.60.
India’s Sensex lost less than 0.1% to 59,664.17. New Zealand and Jakarta advanced while Singapore, Bangkok and Kuala Lumpur declined.
In energy markets, the reference price for US crude fell 32 cents to $76.09 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.46 to $76.41 on Wednesday. Brent crude, the price basis for international oil trading, fell 52 cents to $82.32 a barrel in London. In the previous session, it lost $2.62 to $82.84 a barrel.
The dollar fell to 128.37 yen while the euro rose to $1.0994 from $1.0979.
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