Stocks inch higher after balanced tapering signals from Powell

Asian shares rose and European stocks edged higher after a key speech from Federal Reserve chair Jay Powell, while gasoline futures in the US pushed higher as Hurricane Ida battered Louisiana.

European stocks held near record highs in early trading on Monday, with the Europe-wide Stoxx 600 and Germany’s Dax both up 0.1 per cent in light trading volumes, while markets in London were closed for a bank holiday.

The low volume of trade in Europe followed a largely positive session for stocks in Asia, where Japan’s benchmark Topix index closed 1.1 per cent higher and Hong Kong’s Hang Seng was up 0.5 per cent following a relatively dovish speech from Powell on Friday.

Speech

Analysts said Mr Powell’s speech, delivered at the Jackson Hole symposium in Wyoming, marked a tentative step towards dialling down the Fed’s monetary stimulus but avoided any signals of a more sudden withdrawal that risked spooking markets.

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“Powell broke little new ground on the Fed’s outlook for the economy and its likely policy path, consistent with market expectations leading up to the speech”, said Mark Haefele, chief investment officer at UBS Global Wealth Management.

“However, it did have a dovish tilt, with clear investment implications that support the continuation of the reflation trade,” he added, referring to market expectations that easing of lockdown measures in the US will lead to higher growth and inflation.

Futures

In commodities markets, US gasoline futures rose as much as 4.2 per cent on Monday after Hurricane Ida inflicted “catastrophic transmission damage” that wiped out power for the entirety of New Orleans and wrought widespread havoc on Louisiana and neighbouring states.

Gasoline contracts later pulled back to be 1.7 per cent higher at $2.31 (€1.96)a gallon, although New Orleans energy provider Entergy reported more than 750,000 outages across the state and warned it could take weeks to restore power to some of the hardest-hit areas.

Futures markets tipped US stocks to rise at the open on Wall Street later in the day, with the S&P 500 expected to rise 0.1 per cent. – Copyright The Financial Times Limited 2021