Wall St. thinks rate hikes will drop, but the US dollar falls – Business News

NEW YORK (Reuters) – Federal Reserve Chairman Jerome Powell's comments that US benchmark interest rates were "just below neutral" sparked a strong rally in Wall Street on Wednesday, easing investors' concerns about the pace of rate hikes by the US central bank next year.

The hopes that the United States and China could call a trade war ceasefire at the next G20 summit in Argentina have also boosted stocks around the world.

Meanwhile, the dollar retreated with potentially fewer rate hikes in the horizon, and the pound sterling rose after the Bank of England said that the British economy could contract from 8% in about a year after a Brexit without a transaction.

Equity investors reacted favorably to Powell's comments, which indicated that the Fed's rate hikes may not be as large as initially expected.

"It's certainly a change of language and good news for investors," said Jack Ablin, chief investment officer at Cresset Wealth Advisors in Chicago. "This makes the value of risk aversion less appealing and therefore makes risk taking more attractive, such as equity investments."

US President Donald Trump recently criticized the Fed for raising rates.

The Dow Jones Industrial Average rose 617.7 points, or 2.5%, to 25,366.43%, the S & P 500, from 61.61 points, or 2.30%, to 2 743.78 and the Nasdaq Composite added 208.89 points, or 2.95%, to 7,291.59.

The pan-European STOXX 600 index was down 0.01% and MSCI's global stock ticker gained 0.08%.

Earlier, the hopes of a truce on trade between the United States and China had also contributed to the rise in shares.

Despite Trump's harsh remarks on the upcoming trade dispute ahead of Saturday's meeting with Chinese President Xi Jinping, markets have been focused on comments from Larry Kudlow, the White House's economic adviser, who said the two countries could ask for a truce.

Nevertheless, the persistent caution that both sides would leave the summit without an agreement has limited gains in Europe, where motor vehicle stocks were under pressure after the release of a report. Trump may soon impose new import tariffs.

A rapprochement between the United States and China is considered crucial, as growth and global trade are already showing signs of an alarming slowdown.

(For a World Trade Organization (WTO) outlook chart, click https://tmsnrt.rs/2RlhEOc).

Uncertainty over world trade as well as the Brexit-Italy-EU conflict had supported the US dollar, but the dollar index <.DXY> plunged 0.53% after Powell's comments. Gold price , which move in the opposite direction of the dollar, rose to 1% from the two-week lows.

L & # 39; euro was up 0.7% to $ 1,1337.

Sterling At the same time, it rose 0.6% after the Bank of England warned of the economic risks of the British exit from the European Union without agreement.

Britain could suffer even more from its economy than during the global financial crisis of 10 years ago if it left the EU in the worst Brexit scenario.

"Our job is not to hope for the best, but to prepare for the worst," said BoE Governor Mark Carney.

Some market participants took these remarks as a good sign.

"I think it's allaying fears by saying that he's ready to do whatever it is necessary to do," said Michael Skordeles, US macroeconomic strategist at SunTrust Advisory Services at Atlanta, regarding the bank's response to Brexit.

US government bond prices have been mixed following the Fed president's speech.

10-year Treasury Bill The last drop of 1/32 of its price yielded 3.0608%, against 3.057% Tuesday night.

The guarantee of 30 years The last drop of 17/32 in price at 3.33484 percent, of 3.32 percent.

Futures Contracts on US Crude Oil settled $ 1.27, or 2.5%, at $ 50.29 per barrel, its lowest level since October 9, 2017 after US crude inventories rose for a tenth consecutive week, reaching their highest level in a year. Raw Brent finished at $ 1.45, or 2.4%, down to $ 58.76. – Reuters