World shares advance after Fed signals US rate cut likely

|     Elaine Kurtenbach     |

BANGKOK (AP) – Shares rose yesterday in Europe and Asia, tracking gains on Wall Street after Federal Reserve Chairman Jerome Powell suggested the United States (US) central bank is ready to cut interest rates for the first time in a decade.

Germany’s DAX edged less than 0.1 per cent higher to 12,377.95 and the CAC 40 in France added 0.2 per cent to 5,577.95. Britain’s FTSE 100 picked up 0.2 per cent to 7,546.21. Wall Street looked set to extend its winning streak, with the future contract for the Dow Jones Industrial Average up 0.2 per cent to 26,909.00. The future for the S&P 500 also gained 0.2 per cent, to 3,003.00.

The Fed chairman told Congress in his semi-annual report that many in the US central bank believe a weakening global economy and rising trade tensions have strengthened the case for a rate cut. That allayed investors’ concerns that unexpectedly strong US jobs data reported last Friday might give the Fed reason to stay put on interest rates.

In Asia, Hong Kong’s Hang Seng jumped 0.8 per cent to 28,431.80, while the Shanghai Composite index edged 0.1 per cent higher to 2,917.76. In Japan, the Nikkei 225 index climbed 0.5 per cent to 21,643.53 and South Korea’s Kospi advanced 1.1 per cent to 2,080.58. Australia’s S&P ASX 200 gained 0.4 per cent to 6,716.10. Shares also rose in Taiwan and Southeast Asia.

“Local equity markets are reveling in the best of both worlds this morning as local investors love nothing more than lower US interest rates and a weaker US dollar,” Stephen Innes of Vanguard Markets said in a commentary.

Chinese investors monitor stock prices at a brokerage house in Beijing. – PHOTOS: AP
A man monitors stock prices at a brokerage house in Beijing. Shares rose yesterday in Asia, tracking gains on Wall Street after Federal Reserve Chairman Jerome Powell suggested the US central bank is ready to cut interest rates for the first time in a decade

The US stock market rallied through much of June after the Fed first signaled that it might cut rates if necessary to shore up the US economy.

In his prepared statement, Powell said that since Fed officials met last month, “uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook.” Meanwhile, inflation has fallen farther from the Fed’s target.

The Fed’s benchmark rate currently stands in a range of 2.25 per cent to 2.5 per cent after the central bank raised rates four times last year. Many investors have put the odds of a rate cut this month at 100 per cent.

A quarter-point cut in interest rates, which many investors expect, isn’t likely to have a big impact on consumers’ credit cards or mortgage rates. But it would reassure markets that the Fed would be open to further rate cuts if more signs of weakness in the global economy emerge.

Powell appeared before the Senate Banking Committee yesterday. US consumer inflation data was a focus for traders yesterday.

Investors will have to wait until the end of the month to see what action the Fed takes on interest rates at its next meeting of policymakers.

Retaliatory tariffs remain another worry for markets.

While China-US trade tensions have calmed with a resumption of talks by phone between top envoys, friction with France looms after President Donald Trump’s administration launched an investigation into French plans for a special tax targetting big tech companies.

ENERGY: Benchmark US crude oil picked up 33 cents to USD60.76 per barrel in electronic trading on the New York Mercantile Exchange. On Wednesday, it jumped USD2.60 to settle at USD60.43 a barrel, the highest level since late May.

Brent crude oil, the international standard, added 40 cents to USD67.41 per barrel. Overnight, it gained USD2.85 to close at USD67.01 a barrel.

CURRENCIES: The dollar fell to 108.10 Japanese yen from 108.45 yen on Wednesday. The euro strengthened to USD1.1268 from USD1.1250.