Stock markets mostly higher on US Fed chief’s outlook

Stock markets mostly higher on US Fed chief’s outlook

Monitoring Desk

LONDON: Stock markets turned mostly higher Wednesday after US Federal Reserve chief Jerome Powell kept the door open to an interest rate cut this month.

In mid-afternoon trading, both the blue-chip CAC 40 index in Paris and the FTSE in London were higher, while the DAX 30 in Frankfurt was steady.

On the other side of the Atlantic, Wall Street also opened higher.

“Powell’s prepared testimony release highlighted uncertainties since the June FOMC continue to dim the outlook,” said Edward Moya, analyst at the Oanda brokerage in reference to a meeting of the central bank’s rate-setting Open Markets Committee.

“The economic outlook has not improved in recent weeks and that pretty signals a rate cut at the July 30-31 FOMC meeting,” he said.

On the foreign exchange markets, the pound rebounded from more than two-year lows versus the dollar meanwhile, as official data showed Britain’s economy returned to growth in May, with gross domestic product expanding by 0.3 percent following a contraction of 0.4 percent in April.

In Britain, “the pound caught some bid as the UK economy bounced back in May following the decline in April,” noted Neil Wilson, analyst at Markets.com.

“But traders need to be careful as Brexit uncertainty remains the major drag on sterling.”

Fed officials have helped spur a rally in world equities in recent weeks by taking an increasingly dovish or subdued tone regarding monetary policy, fuelling expectations they would cut borrowing costs sharply to support a stuttering economy.

Hopes for a deep reduction seemed to have been set back on Friday by data showing the US created far more jobs than expected in June.

But Powell told US lawmakers the case for lower rates “had strengthened” last month given the rising “crosscurrents” in the economy.

While the Fed chief was not explicit, in a prepared statement to the House Financial Services Committee he noted that the central bank in June announced it “would act as appropriate to sustain the expansion.”

Elsewhere, oil prices jumped more than two percent after a closely watched industry report showed a massive drop in US stockpiles last week, while traders also cheered reports that Russian output fell in July to its lowest in nearly three years.

The developments provided a boost to the commodity, which took a hit earlier in the week as a stronger dollar added to ongoing worries about the trade war and soft global outlook.

Still, analysts said prices will remain volatile as investors weigh the trade row against geopolitical tensions in the Middle East. (AFP/APP)

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