As expectations that the U.S. interest rate may remain high for some time arose, global markets traded in a mixed manner on Wednesday. In early trade, Germany’s DAX gained 0.5% to 17,854.58 and France’s CAC 40 jumped 1.1% to 8,016.66.
The UK’s FTSE 100 increased by 0.5% to 7,861.43. US stock futures were expected to move higher, with the Dow rising 0.2% to 37,798.97. At 5,106.75, S&P 500 futures increased by 0.3%.
Decline In Inflation
Japan’s benchmark Nikkei 225 fell 1.3% to close at 37,961.80 in Asia. The S&P/ASX 200 index for Australia decreased by almost 0.1% to 7,605.60.
The Kospi of South Korea fell by over 1.0% to 2,584.18. The Shanghai Composite increased 2.1% to 3,071.38, while the Hang Seng in Hong Kong hardly moved, edging up to 16,251.84.
The Federal Reserve Chairman Jerome Powell stated at a Tuesday event that the bank has been holding off on cutting its primary interest rate—which is currently at its highest point since 2001—because it needs more assurance that inflation is declining steadily toward its 2% target.
This statement sparked a mixed response. According to Yeap Jun Rong, an IG market analyst, “appetite for risk-taking remains weak, with Federal Reserve Chair Jerome Powell validating a later timeline for rate cuts, alongside a raft of Fed speakers calling for more patience in easing.”
Higher Inflation
Powell stated that the Fed will maintain its current rate of interest “for as long as needed” if higher inflation does continue.
However, he also conceded that if the labor market unexpectedly contracts, the Fed may decide to lower interest rates.
Powell made reference to a number of reports this year that showed inflation remained higher than anticipated.
“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell said.
The majority of traders are placing their bets on the Fed cutting interest rates just once or twice this year, compared to anticipating six or more rate cuts by the end of 2024.
IBenchmark U.S. crude fell 35 cents to $85.01 a barrel in energy trading. The global benchmark, Brent crude, dropped 34 cents to $89.68 a barrel.
In the currency market, the US dollar slightly decreased from 154.65 Japanese yen to 154.56 yen. The euro gained value from $1.0617 to $1.0644.
