US shares reach for record highs as investors take comfort in stimulus
Federal Reserve chairman Jerome Powell: Stock investors take assurance from speech
US equities gained to record highs as investors took assurance from comments by Jerome Powell that the withdrawal of stimulus would be gradual.
The S&P 500 and Nasdaq 100 rose during the Federal Reserve chairman’s much-anticipated address from Jackson Hole, where he reinforced the message that it would be appropriate to begin tapering bond purchases by the end of the year.
The Stoxx Europe 600 index gained, on track for the seventh straight month of gains, the longest streak in eight years.
Mr Powell said the economy has now met the test of “substantial further progress” toward the Fed’s inflation objective while the labor market has also made “clear progress”.
“Investors are breathing a sigh of relief as Powell suggests a kinder, gentler Fed tightening,” said Mike Bailey, director of research at FBB Capital Partners.
“Judging by the equity move, my sense is mainstream investors expected a harder line from Powell about tapering starting in the fall and rate hikes locked in for late 2022 or early 2023,” Mr Bailey said.
Senior market analyst Joshua Mahony at online broker IG said the comments came as a relief to stock markets which had worried all week about the speech.
"Jerome Powell’s Jackson Hole appearance helped lift spirits, with the chairman laying out a slow and steady data-driven approach" and sending tech shares rallying, he said.
"However, the decision to state that tapering would be dependent upon continued economic improvements does highlight the possibility that we could see further delays if rising Covid cases further spur growth," Mr Mahony said.
Stocks climbed in China, where the central bank signaled targeted steps to cushion the economy.
Oil prices rose more than 2% and were on track for their biggest weekly gains in over a year as energy firms began shutting production in the US Gulf of Mexico ahead of a major hurricane expected to hit early next week.
Brent crude climbed 2.2% to $72.63 a barrel.
"Energy traders are pushing crude prices higher in anticipation of disruptions in output in the Gulf of Mexico and on growing expectations Opec+ might resist raising output given the recent Delta variant impact over crude demand," Edward Moya, senior market analyst at Oanda, said.
US oil and gas companies raced to complete evacuations from offshore Gulf of Mexico platforms as Tropical Storm Ida, which is expected to strengthen into a major hurricane before slamming into Louisiana early next week, advanced towards oilfields that provide about 17% of the nation's oil production.
“Clearly, the hurricane is what the market is focusing on now, at least in the short-term. We are going to be losing supply from refiners and some demand,” said Andrew Lebow, senior partner at Commodity Research Group. “The market had expected what the Federal Reserve was planning and had discounted it.”
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