Wednesday 23 October 2019

Federal Reserve pushes S&P through 3,000 points

Markets Report

The S&P 500 burst through 3,000 points for the first time as Federal Reserve chair Jerome Powell put a rate cut by the world's most powerful central bank as early as this month firmly on the table. (stock picture)
The S&P 500 burst through 3,000 points for the first time as Federal Reserve chair Jerome Powell put a rate cut by the world's most powerful central bank as early as this month firmly on the table. (stock picture)

The S&P 500 burst through 3,000 points for the first time as Federal Reserve chair Jerome Powell put a rate cut by the world's most powerful central bank as early as this month firmly on the table.

The news came too late for many European markets where negative sentiment had weighed during their trading session, including the ISEQ, which closed down 31.67 points, a fall of 0.51pc, at 6,235.05.

Shares in Europe and on Wall Street had retreated from last week's optimism over a Fed rate cut after a strong June jobs report on Friday which had reduced expectations of a sharp rate cut this month.

In his testimony on Capitol Hill, Mr Powell said growth had "moderated" and that there was "a risk that weak inflation will be even more persistent than we currently anticipate".

Markets are now pricing in a 25-basis-point cut at the Federal Open Market Committee's next session on July 30-31. The S&P 500 had given up some of its early gains by the middle of the US trading day and was at 2.987.87 points.

Market expectations are that the European Central Bank will also be easing policy soon and a report from the European Commission yesterday confirmed the eurozone's weak growth outlook, with industrial powerhouse Germany set to expand by just 0.5pc this year.

In a sign of the bond market rally that has driven yields sharply lower, Germany yesterday sold 10-year bunds at a yield of minus 0.26pc and without a coupon. German government bond yields fell around three basis points after Mr Powell spoke and closed the day at around -0.31pc, having hit a 10-day high of -0.279pc earlier on better than expected French industrial production data.

In currency markets, the pound staged another fall against the euro, tipping through the key 90 pence level at its weakest, as concerns grew of a hard Brexit, and the currency closed down 0.1pc at 89.99 pence.

The past two weeks have seen the pound on track for a record 10-week losing streak versus the euro.

Adding to its troubles, Britain has become embroiled in a diplomatic spat with the United States, following the leak of memos about the Trump administration from the British ambassador Kim Darroch.

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