On Wednesday, global stock markets witnessed a mixed performance, driven by renewed speculation surrounding U.S. interest rates and their potential trajectory.
In European markets, the CAC 40 in France surged by 1.1% during early trading, reaching 8,016.66 points, while Germany’s DAX rose by 0.5% to 17,854.58 points. Similarly, the UK’s FTSE 100 advanced by 0.5% to 7,861.43 points. Across the Atlantic, U.S. stock futures indicated a modest uptick, with Dow futures up by 0.2% at 37,798.97 points, and S&P 500 futures rising by 0.3% to 5,106.75 points.
However, the trend was different in Asian markets. Japan’s Nikkei 225 index declined by 1.3%, closing at 37,961.80 points. Australia’s S&P/ASX 200 also saw a slight dip of nearly 0.1% to 7,605.60 points. South Korea’s Kospi index experienced a more significant drop, down by almost 1.0% to 2,584.18 points. Conversely, Hong Kong’s Hang Seng index remained relatively unchanged, inching up to 16,251.84 points, while the Shanghai Composite index surged by 2.1% to 3,071.38 points.
The market’s mixed response followed remarks made by Federal Reserve Chairman Jerome Powell during an event on Tuesday. Powell indicated that the central bank is exercising caution regarding any potential reduction in its main interest rate, which currently stands at its highest level since 2001. Powell emphasized the need for greater confidence that inflation is moving sustainably towards the Fed’s 2% target before considering any adjustments to monetary policy.
Yeap Jun Rong, a market analyst at IG, highlighted a prevailing sense of risk aversion among investors. Powell’s comments, suggesting a delay in the timeline for rate cuts, alongside other Fed officials advocating for patience in easing monetary policy, contributed to this sentiment.
Powell mentioned that if higher inflation persists, the Fed will maintain the current interest rate level for as long as necessary. However, he also acknowledged the possibility of rate cuts in the event of unexpected weakness in the job market.
Despite initial expectations for multiple interest rate cuts in 2024, traders are now primarily anticipating only one or two cuts for the year. This shift reflects ongoing uncertainty surrounding inflation dynamics and monetary policy decisions.
In energy markets, benchmark U.S. crude oil prices declined by 35 cents to $85.01 per barrel, while Brent crude, the international standard, fell by 34 cents to $89.68 per barrel.
Currency markets also saw some movement, with the U.S. dollar slightly weakening against the Japanese yen to 154.56 yen from 154.65 yen. Meanwhile, the euro strengthened slightly against the dollar, reaching $1.0644, up from $1.0617.
