LONDON (AFP) – United States (US) and European stock markets rose yesterday as the Federal Reserve left the door open to easing interest rates and the British government announced tax cuts.
Bitcoin and gold remained just short of setting new record highs. US stocks have been in a holding pattern this week ahead of the congressional testimony of Fed chief Jerome Powell.
While Powell said in prepared remarks that bringing down inflation was “not assured”, he added that “if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”
That was enough to send all the main US indexes higher at the opening, after retreating the past two days.
“The upshot is that we still see the first rate cut coming in June and scope for rates to then be lowered a bit more quickly than markets are pricing in,” said Andrew Hunter, deputy chief US economist at Capital Economics.
Powell could provide more insight into his thinking as he takes questions from lawmakers.
Eurozone stocks advanced though less strongly than US markets as investors eyed Thursday’s monetary policy decision from the European Central Bank (ECB).
The ECB is expected to keep its interest rates steady but may give clues about its future intentions.
London equities climbed as finance minister Jeremy Hunt announced a fresh tax cut for millions of workers ahead of a general election expected this year.
“The direct result of Jeremy Hunt’s widespread tax cuts will be higher disposable income, meaning we could see higher GDP growth in the short term,” Mahmoud Alkudsi, senior market strategist at ADSS.
“The equity market could rally if we see tangible evidence of these tax cuts boosting consumer spending and GDP growth,” Alkudsi said.
Bitcoin eased somewhat, a day after a record-breaking run, while gold flirted with its record highs.
Bitcoin stood at USD66,929 following Tuesday’s record pinnacle of USD69,191.
The world’s biggest cryptocurrency has soared this week on tight supplies and moves towards making bitcoin investment more accessible. Among more traditional markets, gold changed hands at USD2,140.23 an ounce, just shy of its historic peak of USD2,141.79.
The precious metal has rocketed on its status as a haven in times of geopolitical turmoil and elevated inflation, and as markets anticipate US rate cuts, which is weighing on the dollar.
World oil prices gained ground on rising risk appetite and signs of strong US energy demand, dealers said.
