Global Stocks Rally thanks to Jerome Powell: Global stocks rose after U.S. Federal Reserve Chair, Jerome Powell, reaffirmed low interest rates
Global stocks jumped on Thursday after U.S. Federal Reserve Chair Jerome Powell reaffirmed interest rates would stay low for a long time. Thus calming market fears that higher inflation might prompt the central bank to tighten monetary policy.
Powell’s reassurance gave fresh hope to reflation trades and boosted the prices of risky assets while also driving U.S. bond yields up.
European stocks are expected to open higher, when the market opens later today, as Euro Stoxx 50 futures and FTSE futures both up about 0.6%. In Asia, the MSCI shares index rose 1.5% while Nikkei (Japan) gained 1.7%. Hang Seng (Hong Kong) index jumped 1.5% to make up for its previous day losses.
Powell’s “message of hope” reiterated the Fed’s promise to get the U.S. economy back to full employment and to control inflation. He stated that it will take three years for the U.S government to achieve its inflation target. He also reaffirmed that the Fed will not raise interest rates until 2023.
The prospects of a prolonged low-interest-rate rate period are high as investors expect a huge stimulus check and progress in COVID-19 vaccinations to support the economy, especially the sectors hit the hardest by the pandemic.
On Wall Street, the Dow Jones average jumped 1.35% to a record high, outperforming the Nasdaq, as investors rotated into cyclical shares. Also, The 10-year U.S. Treasuries yield rose to 1.412%, having hit a high of 1.435% earlier today.
In the currency market, the U.S dollar fell 3years low as against riskier currencies. The Australian dollar hit a three-year high of $0.7978 while the Canadian dollar also hit a three-year high of C$1.2503 for one U.S. dollar. The euro rose to touch a one-month high of $1.2183 while the Japanese yen was on the back foot at 105.93 per dollar.