Global Stocks Mixed After Powell Speech, US Futures Lower

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Principal Points

• Markets react mixed to Jerome Powell’s speech before Congress
• US stocks ended Wednesday session mostly higher, futures are under pressure

The global financial market became increasingly jittery on Wednesday as investors tried to position themselves according to the Federal Reserve’s approach to the economy. Money managers were paying close attention to Fed Chair Jerome Powell’s speech before Congress as he gave his remarks on the growing inflationary pressures, unemployment, and the central bank’s outlook for the economy.

European markets slipped from their record highs but later pared the losses, while their Wall Street rivals ended the session mostly higher.

In Europe, major bourses ended the day either flat or in the red as investor sentiment soured due to renewed high inflation expectations. In addition, travel and leisure stocks dropped further on concerns that the Delta variant’s spread could slow down the economic reopening and hurt the return to business and social activities.

The pan-European Stoxx 600 index slipped 0.3% at one point before buyers stepped in and lifted the stock average to a close of 460.56, or 0.09% lower on the day. Travel companies tumbled 0.8% on more signs that the summer tourism could not live up to the high reopening expectations. TUI Group, the world’s number one tourism business, lost 2.9% after it announced it had cancelled more holidays for July and August.

Key Goals Remain Unattained

Germany’s DAX and France’s CAC40 ended virtually unchanged, while the UK’s FTSE100 declined 0.47% on a rising sterling and a spike in inflation for June. Last month’s UK inflation data landed at 2.5%, above the Bank of England’s target of 2% and the highest since August 2018. Higher prices arriving earlier than expected created market nervousness as the UK’s central bank could be prompted to perform interest rate hikes sooner than planned.

In the US, stocks wobbled during Jerome Powell’s congressional hearing. The Dow Jones and the S&P500 moved to the upside after Mr. Powell reaffirmed his stance that inflation is transitory and will moderate as the economic recovery continues to accelerate.

The blue-chip Dow finished the day higher by 0.13%, while the broad-based S&P500 closed up 0.12%. The Nasdaq Composite turned lower and ended Wednesday action down 0.22%. During the choppy market environment earlier in the day, the S&P500 popped to a new intraday record before pulling back to lower levels. US stock futures on Thursday point to a mixed open with Nasdaq futures in the green by about 0.20%. Dow futures and S&P futures are floating right below the flatline.

Turning to Wednesday’s event of the day, Federal Reserve Chair Jerome Powell reiterated the central bank will maintain its current policies as Fed officials are still not convinced there has been enough progress toward reaching their two main goals.

Employment, as the first one, still has a “long way to go” to reach its maximum level. Stable prices, on the other hand, still need tweaking as the recent surge in inflation is based on one-off factors, according to the central bank chief.

“Sustainably achieving maximum employment and price stability depends on a stable financial system, and we continue to monitor vulnerabilities here,” the Fed Chair said before Congress.

As a result of Mr. Powell’s dovish stance toward the market, the US dollar depreciated across the board, while gold rallied some $25 to $1,825 per troy ounce.

In crypto markets, bitcoin and other digital assets remained steady on Wednesday. Bitcoin gyrated near the $32,500 levels, while ether hovered around $1,960 per token.