Fed chairman says United States economy healthy, hints at slower rate hikes

Fed chairman says United States economy healthy, hints at slower rate hikes”

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With the Federal Reserve expected next month to raise rates to what some US central bankers believe is at or near a neutral level, Chairman Jerome Powell is retuning his message to signal a more cautious approach on further rate hikes next year.

Trump has repeatedly attacked Powell for continuing to raise the benchmark lending rate, which Trump says undermines the work he is doing to juice the USA economy. US-China trade issues could also dominate the Fed's narrative, he added.

The S&P 500 index rose 61 points, or 2.3 percent, to 2,743.

The Bloomberg Dollar Index sank the most in two weeks, fueling speculation its two-month rally may be over.

Sterling was last trading at $1.2784, down 0.31 percent on the day, after Bank of England Governor Mark Carney warned a disorderly Brexit could trigger a worse economic downturn for Britain than the financial crisis.

"The markets really got a head fake in October, (but on Wednesday) he strongly walked back those expectations", said Scott Anderson, chief economist at Bank of the West. Wednesday's remarks sent stocks soaring and moved at least one analyst, Gregory Daco at Oxford Economics, to expect two instead of three rate hikes next year, as the Fed steers the economy toward a "soft landing" where it could keep growing at a slower clip without stoking inflation. "If the Fed pauses next year, it will have nothing to do with the message that the president has said to them", she said.

Global equity bulls were instilled with a renewed sense of inspiration on Thursday after dovish remarks from Federal Reserve Chair Jerome Powell boosted risk appetite. "Now investors are true believers - and are reacting accordingly".

The market is closely watching a meeting between Trump and Chinese leader Xi Jinping at the G20 summit on Saturday at which the leaders are expected to discuss trade.

Although a US-China trade deal breakthrough seems quite unlikely, any sign of both sides expressing some interest for further discussion could be a welcome development for financial markets.

Investors will watch for the minutes from the Fed's November 7-8 meeting, due on Thursday, for clues to policy in 2019.

The Dow Jones Industrial Average jumped over 617 points or 2.5 percent, registering the best three day gain since 2016, with the addition of 111.22 points or 4.22%, according to the Dow Jones Market Data Group.

Silver rose 1.4 percent to $14.34 per ounce, while platinum fell 0.6 percent to $824.50, having touched its lowest in more than a month, at $809.50.

The Stoxx Europe 600 Index was little changed.

The euro advanced 0.7 percent. On Wednesday, he remained upbeat, forecasting continued solid growth, inflation near the 2 percent target and low unemployment. Following an overnight 0.6 percent slide, it was flat around 96.8 against a basket of currencies.

Bond prices fell. The yield on the 10-year Treasury note rose to 3.07 percent. The spread between 3-year and 5-year Treasury yields at one stage on Friday shrank to less than a basis point, the smallest gap in more than a decade, and a range of strategists continue to predict that the curve will invert.

Italy's borrowing costs slipped too, with 10-year yields dipping around 2 bps.

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