Stock markets split after boost from Fed rate-cut talk / Photo: © AFP
Stock markets split after boost from Fed rate-cut talk
European and Asian stock markets were mixed on Monday after Federal Reserve chief Jerome Powell gave investors a boost last week by signalling that a US interest rate cut was on the way.
Frankfurt fell while the Paris CAC 40 rose and Milan was flat in early afternoon deals. London was closed for a holiday.
In Asia, Tokyo and Seoul finished in the red but Hong Kong and most other exchanges rose.
Equities had surged on Friday after Powell declared at a summit of central bankers in Wyoming that "the time has come" for the Fed to reduce rates that were raised to a 23-year high to tame inflation.
The Fed is now expected to slash its key rate at the next policy meeting on September 17-18, and the only doubts are how big the cut will be and how many more would follow.
The remarks helped push all three main New York indexes more than one percent higher on Friday.
Powell stressed that the "timing and pace" of cuts would depend on data, so analysts will keep a close eye on indicators in the coming weeks.
"With the labour market cooling off and inflation finally inching closer to that elusive two percent target, Powell served up exactly what Wall Street had been drooling over," said independent analyst Stephen Innes.
"Right now, investors are in dreamland -- having their cake, eating it too. The dream scenario? A series of rate cuts that somehow dodge the recession bullet," he said.
New US second-quarter economic growth figures will be published Thursday, followed by the Fed's preferred gauge of inflation -- the personal consumption expenditures (PCE) price index -- on Friday and jobs data next week.
Weak jobs data rocked the markets in early August, as analysts worried that the Fed had waited too long to cut rates and avoid a recession.
Deutsche Bank analysts said they expect the Fed to cut rates by 0.25 percentage points next month but that "weak labour-market data could shift the focus" to a half-point reduction.
In Europe, German business confidence fell further in August, a closely watched survey showed Monday, as the continent's biggest economy struggles to emerge from a weak period.
The yen strengthened against the dollar after the US rate-cut talk and Bank of Japan chief Kazuo Ueda said his institution could hike its own rates again.
The yen was sitting at around 144 per dollar.
Traders also kept an eye on a flare-up in Middle East tensions after Israel and Iran-backed Lebanese militant group Hezbollah traded fire on Sunday.
Brent, the international benchmark, rose 2.7 percent to more than $81.
- Key figures around 1140 GMT -
Paris - CAC 40: UP 0.2 percent at 7,593.25 points
Frankfurt - DAX: DOWN 0.1 percent at 18607.34
London - FTSE 100: Closed for a holiday
Tokyo - Nikkei 225: DOWN 0.7 percent at 38,110.22 (close)
Hong Kong - Hang Seng Index: UP 1.1 percent at 17,798.73 (close)
Shanghai - Composite: FLAT at 2,855.52 (close)
Dollar/yen: DOWN at 144.18 yen from 144.34 yen on Friday
Euro/dollar: DOWN at $1.1167 from $1.1193
Pound/dollar: DOWN at $1.3184 from $1.3209
Euro/pound: UP at 84.71 pence from 84.70 pence
West Texas Intermediate: UP 2.7 percent at $76.85 per barrel
Brent North Sea Crude: UP 2.7 percent at $81.15 per barrel
New York - Dow: UP 1.1 percent at 41,175.08 (close)
(U.Stolizkaya--DTZ)
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