The US central bank downplayed the likelihood of bigger rate hikes
US stock markets closed sharply higher overnight to see the biggest one-day rally since 2020 amid a more cautious tone from Fed’s Powell. The central bank governor eased concern the FOMC will embrace for a more aggressive pace of hiking rates in the months ahead. Stocks surged after Powell said the Fed wasn’t “actively considering” raising interest rates by 0.75%. As such, the Dow Jones rose 2.8%, the S&P 500 jumped or 3%, and the Nasdaq Composite added 3.2%.
Following suit, Asian equities advanced on Thursday, albeit at a more modest pace. Investors breathed a sigh of relief after the Federal Reserve downplayed the likelihood of bigger rate hikes. The Shanghai Composite Index gained 0.7% and Hong Kong’s Hang Seng gained 0.36%. Sydney’s S&P-ASX 200 advanced 0.8%. Markets in Japan and South Korea remain closed for holidays.
In Europe, stocks opened higher as the Fed managed to cool aggressive tightening bets. The pan-European STOXX 600 index rose 1.8% in early deals before trimming some gains in recent trading, suggesting the post-Fed rally may be waning already. Anyway, risk-on tone persists in the region for the time being. Leading the gains, shares of Airbus jumped 8% after the company reported a higher-than-expected first-quarter profit.
Meanwhile, the dollar fell across the board late on Wednesday in a knee-jerk reaction to a more cautious tone from the Fed. However, the greenback proceeded to some recovery on Thursday as Treasury yields bounce back up as well. As such, EURUSD came off one-week highs seen around 1.0640 to settle below 1.0600 in early European deals. Ahead of the weekend, the pair could reverse recent gains should the US jobs report reveal strong figures.