Global shares higher on Wall Street rise, Fed Chair comments

Global shares higher on Wall Street rise, Fed Chair comments

TOKYO Global stock benchmarks rose on Friday as comments from the U.S. Federal Reserve chairman assured markets interest rate increases would likely be within their expectations.

France’s CAC 40 added 0.7% in early trading to 6,168. 33, while Germany’s DAX gained 0.9% to 13,014.33. Britain’s FTSE 100 rose nearly 1.1% to 7,338.96. U.S. shares were set to move higher with Dow futures up 0.4% at 31,902.00. S&P 500 futures rose 0.5% to 4,025.50. Oil prices rose.

Japan’s benchmark Nikkei 225 rose 0.5% to finish at 28,214.75. Australia’s S&P/ASX 200 added 0.7% to 6,894.20. Hong Kong’s Hang Seng jumped 2.8% to 19,389. 03, while the Shanghai Composite added 0.8% to 3,262.05. South Korean trading was closed for a holiday.

“An ongoing recovery in the risk environment could provide a positive background for the Asia session, although Chinese equities seem to still be having some difficulty tapping on the improved climate for some relief,” Yeap Jun Rong (IG market strategist in Singapore) said.

China is releasing a variety of economic data. More data will be released next week. Because of the impact China’s “zero COVID” policy has had on economic activity in the second-largest economy in the world, interest is high.

Investors also pay attention to interest rates as the European Central Bank announced its largest-ever rate hike to combat inflation. This move is in line the U.S. Federal Reserve’s and other central banks’ steps.

Investors heard also from Jerome Powell, Fed Chair. He reiterated the central bank’s commitment not to raise rates for as long as it is necessary to control inflation. Some market observers remain skeptical.

“Given all the challenges ahead on both the energy front and the war front, as well as broad-based inflation that is already affecting people’s lives, it might make more sense to keep rates at slightly stimulatory levels to help offset it rather than adding to it,” stated Clifford Bennett (chief economist at ACY Securities).

Stocks lost a lot of ground in recent weeks, after the Federal Reserve stated that it will continue to raise interest rates to bring down the most severe inflation in decades. Investors have been focusing on the interest rate policies of central banks and the Fed, which have a strong influence on bond and stock markets.

On a day when the European Central Bank announced its big rate hike, Powell addressed a conference on Monetary Policy hosted by the Cato Institute. This think tank promotes libertarian ideas and said that the Fed would keep rates high until the job is done in bringing down inflation to its 2% target. Powell stated that there are many failed attempts to control inflation, which only increases the ultimate costs to society. The Fed has already raised rates four more times this year. Markets expect it to increase rates by three-quarters of an additional percentage point at its next meeting in just two weeks.

Powell “sounded very resolute in the (Fed’s) mission to squelch inflation, and as a result probably gave more credence to the possibility of a 75-basis point hike at the September meeting,” said Sam Stovall, chief investment strategist at CFRA. But once investors realized that he was not really saying anything new, the markets rebounded,” he stated.

In energy trading, benchmark U.S. crude rose 92 cents to $84. 46 a barrel. Brent crude, an international standard, was $1 more. 08 to $90. 23 a barrel.

In currency trading, the U.S. dollar fell to 142. 29 yen from 144. 09 yen. The euro cost $1. 0098, up from $1.0002.

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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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