Wall Street and FTSE 100 push higher on US inflation shift
Wall Street opened higher and the FTSE 100 reversed losses this afternoon as investors digested the Jackson Hole central banking symposium, where US Federal Reserve chair Jay Powell spoke.
Powell punchy update on the Fed’s monetary policy review buoyed investors and drove gains for US stocks.
Read more: Jackson Hole symposium: All eyes on Fed chair Powell
London’s blue-chip index is up just 0.1 per cent to 6,052 points. The FTSE 250 of mid-cap firms is flat at 17,747.
Germany’s Dax, France’s CAC 40 and the Europe-wide Stoxx 600 are all in the red by less than 0.1 per cent.
US Federal Reserve chair Powell rolled out an aggressive new strategy to restore the US to full employment and lift inflation back to healthier levels.
Investors lapped it up: The Dow Jones Industrial Average rose 52.15 points, or 0.18 per cent, at the open to 28,384.
The S&P 500 opened higher by 6.41 points, or 0.18 per cent, at 3,485, while the Nasdaq gained 23.14 points, or 0.20%, to 11,688 at the opening bell.
Rolls Royce leads FTSE 100 fallers
Back on this side of the pond, engine-maker Rolls Royce’s shares tumbled 6.7 per cent, leading the FTSE 100’s fallers.
Rolls revealed it swung to a loss of £5.4bn for the first-half following the economic shock of the Covid-19 pandemic.
David Madden, market analyst at CMC Markets, said: “The engineering group has been struggling recently as problems with two of their engines and massive disruptions to the aviation sector has hit the company hard.”
Homeserve, the home emergency repairs firm, dropped 3.1 per cent after Morgan Stanley downgraded its rating. It was the second-biggest FTSE faller.
The UK’s blue-chip index has struggled to mount the kind of comeback seen in the US. The S&P 500 and Nasdaq both yesterday hit new all-time highs.
Global stocks also touched new heights, with the FTSE All World index beating the bar set in February.
Pound treads water as FTSE 100 slips
Overnight in Asia, China’s CSI 300 climbed 0.5 per cent. Hong Kong’s Hang Seng fell 0.8 per cent and Japan’s Nikkei slipped by 0.4 per cent, however.
The dollar was flat against a basket of other currencies. The pound was down 0.1 per cent at $1.319.
A strong pound had put pressure on the FTSE 100 earlier this week, pushing it to lag behind its global counterparts.
Lee Hardman, currency analyst at MUFG, said the Fed’s “aggressive” response to the coronavirus crash had helped weaken the dollar.
“Market participants’ are now eagerly awaiting the keynote speech today from Fed Chair Powell at Jackson Hole to see if he provides fresh impetus for the US dollar sell off.”
Some analysts were sceptical about the excitement surrounding Powell’s speech.
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Kit Juckes of Societe Generale said: “The Fed’s exploded its balance sheet, money supply is surging, the market doesn’t price any kind of rare hike in the next couple of years.
“Playing with the inflation target or promising to keep rates lower for even longer are small beer from here.”