Stocks rally on Powell’s mild rates comments

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Dollar weakens after Fed chair says prices have started to fall, while warning that the battle against inflation isn’t over

Shares jumped and most currencies rose against the dollar on Wednesday, as investors discerned a dovish tone in comments from Federal Reserve chair Jerome Powell, though a policy tweak by the ECB meant European bonds sat out the rally.

MSCI’s broadest index of Asia Pacific shares outside Japan rose 0.76%, though Japan’s Nikkei failed to join in the rally after disappointing results from big tech firms including Nintendo. “The market is looking for a dovish message where it can almost regardless. Powell said effectively the terminal rate could be higher than the market expects, but the Nasdaq and S&P 500 were up, though I think they’re wrong,” said Ben Jones, director of macro research at Invesco.

Powell’s avoidance of a more hawkish tone also gave a cue to currency markets, as the euro strengthened 0.23% against the dollar, and the pound gained 0.33%. However, bonds in Europe continued to sell off after tumbling the previous day when the European Central Bank said it would cut the interest rate it pays governments on deposits.

 

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