Global stocks shot higher and the dollar sagged on Friday after the head of the US Federal Reserve signalled it was no longer set on raising interest rates.

The US central bank has no "pre-set" plan for interest rates and will bide its time to see how the economy evolves before making any moves, Federal Reserve Chairman Jerome Powell.

The comments signal a major shift from the Fed's previous indications it would continue hiking interest rates, and Powell noted financial markets were worried about a slowdown in the US and Chinese economies.

Investors have been gripped by fears over the global economy in recent weeks -- which have seen stock prices tumble and confidence wane among corporations which foresee slowing demand and weakening sales in 2019.

Powell said the Fed is "prepared to adjust policy quickly and flexibly" to support the economy.

He also reasserted the central bank's independence saying he would not step down even if President Donald Trump asked him to.

Trump has been a frequent and vocal critic of Powell and the Fed, blaming them for raising rates which he says pose a threat to his economic agenda - an unprecedented public berating that breaks with recent norms.

Asked at an economic conference in Atlanta if he would step down should Trump request his resignation, Powell said, "No."

He said he had not heard directly from Trump despite the president's many recent Twitter outbursts

The comments helped send US and European stock indices sharply higher. 

The Dow soared 3.0 per cent in morning trading, with the broader S&P 500 up 3.1, with the tech-heavy Nasdaq Composite shooting 3.7 per cent higher.

In Europe, Frankfurt was up 3.3 per cent, while Paris advanced 2.8 per cent and London 2.3 per cent.

They were already up strongly on data showing that at least in terms of job creation the US economy continues to be healthy.

The US economy added a whopping 312,000 jobs in December, and wages rose steadily, gaining 3.2 percent for the year.

"For all the current market doom and gloom over the US’s prospects, there are some positives, such as the red-hot jobs market," said ING bank's chief international economist, James Knightley.

"This really positive report should certainly ease creeping fears in the market that the Federal Reserve may be forced to cut interest rates" due to a slowdown in the economy, he added.

Most Asian exchanges also moved upwards on positive news from China. 

A leading survey of Chinese manufacturing nudged higher for December, confounding analysts who had expected it to decline.

Meanwhile, China's central bank moved after markets closed there to stimulate the economy by allowing commercial banks to use more of their funds for lending.

Market analyst David Cheetham at XTB online trading platform said that move by China’s central bank "cut the bank reserve ratio by 1 percentage point to release around 1.5 trillion yuan of liquidity and this has sparked a rally this morning in stocks as they look to recover from recent declines."     

Hopes of progress regarding China-US trade war tensions also provided support to equities, analysts said.

Beijing said Friday a US delegation would visit China at the start of next week for the first face-to-face talks since President Donald Trump and his Chinese counterpart Xi Jinping agreed a ceasefire.

Word of the meeting follows small signs of progress - and the absence of new threats from Trump - while the two sides work to ease trade tensions.

The dollar slid against the euro and pound after Powell's comments on the shrinking prospects of interest rate increases.

 

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.