Sunday , September 27 2020
Breaking News
Home / Breaking News / US stocks extend rally as Powell says no rush on rate rises
US stocks extend rally as Powell says no rush on rate rises

US stocks extend rally as Powell says no rush on rate rises

NEW YORK: US stocks extended a recent rally after US Federal Reserve chief Jerome Powell took a major step to stimulate the economy by saying he would not rush to raise interest rates and could allow inflation to stay above his two-percent target “for some time.” Allowing inflation to overshoot is expected to boost job creation as the Fed pursues its goal of “maximum employment”, while also recognising that greater employment has not been driving prices significantly higher in recent years.

“This change reflects our appreciation for the benefits of a strong labour market, particularly for many in low- and moderate-income communities,” said Powell, adding that the Fed is prepared to use “our full range of tools to support the economy.” Earlier, global equities were subdued as traders weighed geopolitical concerns which resurfaced after Beijing reportedly fired missiles during exercises around the South China Sea and the US sanctioned several Chinese firms linked to the disputed region.

The Dow had added almost 1 percent two hours into the session although European markets closed having lost ground, London notably sagging on record net first half losses for Rolls Royce as the coronavirus outbreak grounded aircraft worldwide and sparked a crisis in air transport.

“Today was dubbed the “Powell Day” and the US central bank Chairman did not disappoint,” said Fawad Razaqzada, analyst with ThinkMarkets.

“The new approach means inflation could rise above 2% for some time and will not necessarily lead to monetary tightening” meaning “monetary policy will likely remain loose much longer than would have been the case previously.” As Wall Street revved up its engines on the back of a clutch of record-breaking rallies, Asian trade was grounded by a fresh flare-up in coronavirus cases in the region.

The mood was also downbeat after Bloomberg News reported that China had fired four ballistic missiles into the South China Sea as part of a military exercise, a day after Beijing said a US spy plane had entered a no-fly zone in northern China.

The region is one of a number of issues over which China-US tensions have spiked in recent months.

In July, Washington declared Beijing’s pursuit of territory and resources there illegal, explicitly backing the territorial claims of Southeast Asian countries against China.

And on Wednesday, it imposed sanctions and restrictions on 24 Chinese companies and associated officials for taking part in building artificial islands in the disputed waters.

– Storm hits oil production – Oil traders are meanwhile keeping tabs on Hurricane Laura in the Gulf of Mexico, which made landfall in Louisiana on Thursday morning.

Around three million barrels a day of refining capacity have been closed after US authorities said the hurricane could bring “potentially catastrophic storm surges, extreme winds and flash flooding”.

Crude prices slid back after testing five month highs earlier in the weeks.

– Key figures around 1545 GMT – New York – Dow: UP 0.9 percent at 28,591.71 points London – FTSE 100: DOWN 0.8 percent at 5,999.99 (close) Frankfurt – DAX 30: DOWN 0.7 percent at 13,096.36 (close) Paris – CAC 40: DOWN 0.6 percent at 5,015.97 (close) EURO STOXX 50: DOWN 0.7 percent at 3,334.35 Tokyo – Nikkei 225: DOWN 0.4 percent at 23,208.86 (close) Hong Kong – Hang Seng: DOWN 0.8 percent at 25,281.15 (close) Shanghai – Composite: UP 0.6 percent at 3,350.11 (close) Euro/dollar: DOWN at $1.1797 from $1.1830 at 2100 GMT on Wednesday Dollar/yen: UP at 106.53 yen from 105.99 yen Pound/dollar: DOWN at $1.3194 from $1.3210 Euro/pound: DOWN at 89.39 pence from 89.56 penceBrent North Sea crude: DOWN 1.4 percent at $45.00 per barrelWest Texas Intermediate: DOWN 1.4 percent at $42.76