Wall Street woke up in the red, but European markets were up in afternoon trading, with London’s FTSE 100 index hitting a record high of 7,934.30 before paring gains.
European stock markets rose, but Wall Street opened lower on Wednesday as investors digested President Joe Biden’s calls for tax hikes and the latest interest rate signals from U.S. Federal Reserve chief Jerome Powell.
In his annual State of the Union address on Tuesday, Biden called for unity and touted a blue-collar economic resurgence, with proposals including a new minimum tax on billionaires.
Traders also took note of remarks from Powell, who reiterated on Tuesday that inflation was down, but admitted that interest rates may need to rise more than expected to bring it under control.
Wall Street woke up in the red, but European markets were up in afternoon trading, with London’s FTSE 100 index hitting a record high of 7,934.30 before paring gains.
In the euro zone, the Frankfurt and Paris indices jumped on the announcement of spectacular annual profits from the large French energy company TotalEnergies and its Norwegian counterpart Equinor, like its British rivals BP and Shell.
The sector has reaped gigantic profits due to soaring oil and gas prices following the war waged by the main Russian energy producer against Ukraine.
Oil prices rose on Wednesday on new bets on the rebound in Chinese demand as the superpower emerges from nearly three years of strict zero-Covid restrictions.
Biden said the massive oil profits were “outrageous” as he called for a quadruple tax on corporate stock buybacks.
– ‘Soothing message’ –
AJ Bell chief investment officer Russ Mold said Powell “had just the calming message the market was looking for.”
A slew of key US data over the past few months has indicated that a string of bumper hikes last year are beginning to bear fruit, fueling hopes that the Fed could pause its tightening cycle and even cut investment costs. loan at the end of the year.
But a jobs report that beat forecasts on Friday – showing half a million new jobs created in January – fueled speculation that more increases were on the way.
“Concerns that last Friday’s bumper jobs report would see the Fed react to what it perceived to be overheating in the labor market have been allayed, with Powell’s relatively relaxed response possibly reflecting the seasonal anomalies that affect January numbers often,” Mold added.
“Whether Powell will remain as relaxed if the next set of payrolls numbers are also high is open to question,” he said.
Powell’s remarks were also similar to what he said last Wednesday, after the bank’s latest policy meeting, which sparked a rally in stocks.
Fawad Razaqzada, an analyst at City Index and Forex.com, said Powell’s speech was “deemed neutral overall.”
“Powell acknowledged that the disinflationary process is underway, but also suggested that interest rates may need to be pushed even higher if jobs data continues to show upside surprises,” Razaqzada said.
Eyes are now on US inflation data next week.
– Key figures around 15:00 GMT –
New York – Dow Jones: DOWN 0.1% to 34,126.72 points
London – FTSE 100: UP 0.5% to 7,907.14
Frankfurt – DAX: UP 0.9% to 15,462.65
Paris – CAC 40: +0.3% to 7,153.44
EURO STOXX 50: UP 0.4% to 4,226.84
Tokyo – Nikkei 225: 0.3% decline to 27,606.46 (closing)
Hong Kong – Hang Seng Index: DOWN 0.1% to 21,283.52 (close)
Shanghai – Composite: 0.5% decline at 3,232.11 (closing)
Euro/dollar: DOWN to $1.0721 from $1.0726 on Tuesday
Pound/dollar: UP to $1.2067 from $1.2048
Euro/pound: DOWN to 88.88 pence vs. 89.04 pence
Dollar/yen: UP to 131.36 yen from 131.07 yen
North Sea Brent Crude: UP 0.9% to $84.41 a barrel
West Texas Intermediate: UP 1.2% to $78.06 a barrel
