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Stocks gain, dollar dips as Powell hints at Fed rate cuts

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Stocks gain, dollar dips as Powell hints at Fed rate cuts

Powell says Fed to "act as appropriate" to ensure U.S. expansion.

➤ Dollar dips, Treasury yields steady before ADP employment report.

➤ Asian, European shares track Wall Street gains after Powell speech.

World Bank cuts 2019 global growth outlook; IMF lowers China forecast.

Global stocks rose while the dollar drifted lower after Federal Reserve Chairman Jerome Powell hinted that the U.S. central bank is leaving the door open to rate cuts amid concerns over slowing global economic growth and unresolved trade disputes.

Powell said yesterday that the Fed is monitoring developments on trade policy and "will act as appropriate" to ensure that the U.S.'s economic expansion continues. His remarks drove yesterday's rally on Wall Street, with the S&P 500 and the Nasdaq Composite closing up 2.1% and 2.7%, respectively.

"The comments were viewed as a sign the Fed were willing to lower interest rates should it be required, and that acted as a green light to the buyers," wrote David Madden, market analyst at CMC Markets UK, in a note.

U.S. equities look set to extend gains this morning as futures for the S&P 500 and Nasdaq 100 rose. European stocks rose on the back of yesterday's Wall Street rally, with the FTSE 100, Germany's DAX and France's CAC 40 each advancing 0.5% as of 6:30 a.m. ET.

The MSCI Asia-Pacific ex-Japan stock index added 0.5%, while the Nikkei 225 closed 1.8% higher. Hong Kong's Hang Seng gained 0.5% while the Shanghai SE Composite index ended the session broadly unchanged after data pointed to China's services sector activity growth easing in May as trade tensions weighed on business confidence.

The International Monetary Fund today slashed its 2019 growth outlook for China to 6.2% from 6.3%, saying "additional policy easing would be warranted" if trade tensions with the U.S. worsen. Also citing geopolitical uncertainties, the World Bank Group yesterday lowered its global growth forecast to 2.6% for 2019 from an estimated 3.0% in 2018.

Meanwhile, delegates from Mexico will meet with U.S. Vice President Mike Pence today in Washington as the Trump administration's planned tariff on Mexican imports faces growing opposition from Republicans.

In currencies, the dollar weakened following Powell's speech, with the index measuring the U.S. currency's performance against a basket of major peers ticking down 0.1% to below 97.0. The euro gained 0.2% against the dollar ahead of a monetary policy decision by the European Central Bank tomorrow, while sterling added 0.1% as data pointed to a better-than-expected expansion in the British services sector.

U.S. bonds steadied as 10-year Treasurys hovered around 2.13% before the ADP's private-sector employment figures. Yields on 10-year Japanese government bonds fell nearly 3 basis points to negative 0.13%, while those German bunds of equal maturity were little changed at about negative 0.21%. Italian 10-year bond yields added 6 points as the European Commission said an excessive deficit procedure against Rome "is warranted" over its rising debt levels.

Brent crude oil ticked up 0.2% to $62.07 per barrel on the ICE Futures Exchange. Gold advanced nearly 1% to $1,341.70 per ounce.

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The day ahead:

8:15 a.m. ET — U.S. ADP employment report (Econoday consensus: 175,000)

8:30 a.m. ET — Canada labor productivity

9:45 a.m. ET — U.S. services purchasing managers' index (Econoday consensus: 50.9)

9:45 a.m. ET — U.S. Fed's Richard Clarida and Raphael Bostic speak

10 a.m. ET — U.S. Fed's Michelle Bowman speaks

10 a.m ET — U.S. Institute for Supply Management non-manufacturing index (Econoday consensus: 55.8)

10:30 a.m. ET — Energy Information Administration petroleum status report

1:15 p.m. ET — U.S. Fed's Eric Rosengren speaks

2 p.m. ET — U.S. Beige Book