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Stocks rally after Powell speech, oil prices surge

Global equity market rose yesterday after Federal Reserve Chairman Jerome Powell expressed no surprises in a key speech outlining a steady course for monetary policy, while oil prices surged on signs Iran sanctions may constrain worldwide supply.

The benchmark S&P 500 and the Nasdaq hit all-time highs after Mr Powell’s comments at an annual meeting of central bankers did little to change market expectations of an interest rate hike in September and perhaps again in December.

The dollar weakened as Mr Powell, speaking in Jackson Hole, Wyoming, said a gradual approach of raising rates remains appropriate to protect the US economy and keep job growth as strong as possible with inflation under control.

The dollar index fell 0.58 per cent, while the euro and Japanese yen rose against the greenback. MSCI’s gauge of stocks across the globe gained 0.55 per cent while it’s emerging market index rose 0.33 per cent.

The Fed is very confident in the US economy and Mr Powell indicated there is no intention of slowing down the Fed’s rate hikes, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

The energy sector jumped 1.19 per cent, the most among the 11 S&P sectors. The materials sector gained 1.41 per cent.

In Europe, the pan-European FTSEurofirst 300 index of regional shares closed up a preliminary 0.12 per cent.

On Wall Street, the Dow Jones Industrial Average rose 139.04 points, or 0.54 per cent, to 25,796.02. The S&P 500 gained 16.57 points, or 0.58 per cent, to 2,873.55 and the Nasdaq Composite added 66.29 points, or 0.84 per cent, to 7,944.75.

Strong economic growth, strong earnings and low interest rates have combined to continue to move the US equity market higher, said Leo Grohowski, chief investment officer for BNY Mellon Wealth Management.US Treasury prices gave back earlier losses after Mr Powell made the case for further rate increases.

Benchmark 10-year US Treasury notes fell 2/32 in price to yield 2.828 per cent, after rising to 2.850 per cent before Mr Powell’s speech.

The yield curve between two-year and 10-year notes narrowed to 20 basis points, the flattest since 2007. An inverted yield curve in the past has pointed to a recession will occur within two years.

Oil prices surged, rising almost 2 per cent, on signs that Iran sanctions may limit global supply and that a trade war may not curb China’s appetite for US crude.

Benchmark Brent crude oil rose $1.45 a barrel to $76.18. US crude gained $1.31 at $69.14.

The euro rose 0.72 per cent to $1.162 while the Japanese yen strengthened 0.05 per cent versus the greenback at 111.25 per dollar.

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