Global stocks rose after the Federal Reserve’s second 0.75 percentage point interest rate hike in two months, on hopes that the pace of monetary policy tightening could soon slow home sentiment. invest.
Federal funds rate soars to a range of 2.25 to 2.5 percent widely expected but stocks rallied following comments from Fed Chairman Jay Powell that the US central bank was open to the possibility of smaller rate hikes.
“At some point, it will be appropriate to slow down. . . We may make another unusually large increase [in September] but that’s not a decision we’ve made, we’ll be guided by the data,” said Powell.
Global stocks have tumbled this year as central banks move to tackle price hikes inflationary with sharp interest rate hikes, which economists have warned could hurt growth and lead to a recession. So far, the MSCI All-World index of global stocks has fallen more than 17% as central banks in Europe and Asia join the Fed in raising interest rates.
But Powell’s comments on Wednesday provided a blow to the arm sentiment on Wall Streetwhere the benchmark S&P 500 rose to end the day 2.6% higher and the tech-focused Nasdaq Composite posted a 4.1% gain, marking its biggest daily gain in more than two years.
Said traders and strategists Powell’s proposal that monetary policy decisions will depend on data showing a lower likelihood of future major rate hikes.
“This implies that the increase is less significant in the three [Fed] Tai Hui, market strategist at JPMorgan Asset Management, added that the recent meetings were about “inflation and labor market dynamics. . . is now signaling the need for a more cautious approach next year.”
Strong earnings reports from major tech conglomerates also helped bolster market confidence on Wednesday, with shares in Google and Microsoft’s parent Alphabet up 7.7% and 6.7%, respectively.
Gains in Asian stock markets were more muted, with China’s Shanghai and Shenzhen-listed CSI 300 index up 0.7 percent on Thursday and South Korea’s Kospi up 0.9 percent. The Japanese Topix benchmark was unchanged.
However, the prospect of a slower Fed rate hike, which has prompted global investors to dump many Asian currencies in favor of the dollar, has helped strengthen exchange rates in the region.
The Japanese yen rose 1.1% against the greenback to around 135 yen while the Chinese yuan gained 0.2% to 6,745 Rmb/USD.
Futures markets showed European stocks slightly up at the end of the day, with the FTSE 100 set to gain 0.2% at the open, while the S&P 500 is trending down 0.2%.