Stocks mostly higher as Powell signals tough on inflation
US stocks mostly rose Tuesday as US Federal Reserve chief Jerome Powell vowed to be tough on inflation on the eve of the latest US inflation data.
Europe’s major equity markets rebounded from recent falls as investors fished for bargain shares.
Asian stocks ended lower.
World oil prices recovered from Monday’s drop, jumping more than 3 percent, but the dollar traded mixed.
Bitcoin meanwhile, the world’s most popular cryptocurrency, rose above $42,000 just a day after having sunk below $40,000 on fears of reduced liquidity as a result of US monetary policy tightening.
– Powell tough on inflation –
In remarks at his Senate confirmation hearing for a second term as Fed chairman, Powell indicated that if inflation refused to go down then the central bank would be ready to increase rates as needed.
With inflation rising and employment recovering, “the economy no longer needs or wants the very highly accommodative policy” that has seen the Fed move rates to ultra-low levels and stimulate the economy with massive purchases of government and corporate bonds.
Returning to a normal monetary policy should not harm employment, he added.
Investors have been watching anxiously as monetary policymakers react to inflation, which has taken off as the economies recover from the shutdowns and disruptions at the beginning of the pandemic.
Higher interest rates are usually a negative for stocks, but investors have at times seemed reassured that policymakers are intent on restraining inflation which, if it got out of hand, could have a devastating effect on the global economy.
In late morning trading, the Dow was down less than 0.1 percent, while the S&P 500 was up 0.2 percent and the tech-heavy Nasdaq Composite showed a gain of 0.9 percent.
Several global central banks have already started hiking borrowing costs, including the Bank of England.
– US inflation data –
While the fast-spreading Omicron coronavirus variant plays on nerves, traders are now coming to terms with the imminent end to the pandemic era of ultra-cheap cash, which helped the economic recovery and fanned a global rally for nearly two years.
A pick-up in consumer activity, surging wages, supply chain problems and rising energy costs are combining to push inflation in several countries to highs not seen for a generation. That is ramping up pressure on central bankers to act before it gets out of control.
Markets are now awaiting the release of US inflation figures on Wednesday, which could play a major role in the Fed’s timing.
“I’m not sure the inflation data tomorrow is going to put investors’ minds at ease, with CPI (consumer price index) seen hitting a multi-decade high above 7 percent,” said market analyst Craig Erlam at Oanda.
“A higher reading could spook investors once again just as equity markets appear to be stabilizing,” he added.
– Key figures around 1630 GMT –
New York – DOW: DOWN 0.1 percent at 36,028.12 points
EURO STOXX 50: UP 1.0 percent at 4,281.78
London – FTSE 100: UP 0.6 percent at 7,491.37 (close)
Frankfurt – DAX: UP 1.1 percent at 15,941.81 (close)
Paris – CAC 40: UP 1.0 percent at 7,183.38 (close)
Tokyo – Nikkei 225: DOWN 0.9 percent at 28,222.48 (close)
Hong Kong – Hang Seng Index: FLAT at 23,739.06 (close)
Shanghai – Composite: DOWN 0.7 percent at 3,567.44 (close)
Euro/dollar: UP at $1.1363 from $1.1337 late Monday
Pound/dollar: UP at $1.3620 from $1.3575
Euro/pound: UP at 83.43 pence from 83.42
Dollar/yen: UP at 115.39 yen from 115.20 yen
Brent North Sea crude: UP 3.2 percent at $83.43 per barrel
West Texas Intermediate: UP 3.6 percent at $81.05