Global stock markets rose Monday, with US stocks setting fresh records, as investors continued to respond to Federal Reserve boss Jerome Powell indicating the central bank would be cautious in winding down its ultra-loose monetary policy and was in no hurry to lift interest rates.
In a closely watched speech Friday, Powell said the world's top economy was well on the road to recovery from last year's pandemic-induced slump, with millions of jobs recovered and growth at its strongest in decades.
The Fed's bond-buying programme—and colossal government spending worth trillions of dollars—provided crucial support and helped drive an equity market rally for more than a year.
But traders have for months been debating when the crutch will be removed in order to prevent inflation from spiralling out of control and the economy overheating.
And Powell, in a speech to the annual Jackson Hole symposium organised by the central bank, soothed concerns about the bank's approach, saying "it could be appropriate to start reducing the pace of asset purchases this year".
But he added that would not be a signal for an increase in borrowing costs to follow soon after, instead taking into account the impact of the Delta variant on the recovery.
"As widely expected, Fed Chair Powell's Jackson Hole speech did not provide a definitive answer to the… tapering decision," said National Australia Bank's Rodrigo Catril.
"But his dovish undertones on his views on inflation as well as the emphasis on decoupling the rate hike decision from… tapering resulted in a risk positive market reaction."
A strong US jobs reading for August on Friday could step up the timetable for tapering to as early as September, he added, although October remains more likely.
"The stock market responded well on Friday to Mr. Powell's remarks, yet the bigger catalyst was likely his reminder that any future increase in the target range for the federal funds rate faces a substantially more stringent test and that 'we have much ground to cover to reach maximum employment," said Briefing.com analyst Patrick J. O'Hare.
Hurricane hits Gulf
All three main indexes on Wall Street rallied after his speech on Friday, with the S&P 500 and Nasdaq chalking up new records. They continued to move higher on Monday, with the S&P 500 and Nasdaq setting fresh highs.
The positive mood filtered through to Asia, where Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei, Mumbai, Bangkok, and Jakarta were all in positive territory.
In Europe, Paris, and Frankfurt both rose, while London was closed for a holiday.
Oil prices rose further following last week's gains as investors weighed optimism over the recovery outlook and possible damage to production capacity in the United States with the powerful Hurricane Ida slamming into the Gulf of Mexico.
"It is still too early to fully assess damages on US oil infrastructure and thus production in the US Gulf, but signals so far seems to be that the US Gulf crude oil production facilities mostly have escaped severe damages," said commodities analyst Bjarne Schieldrop at SEB Research.
Wednesday's meeting of OPEC and other major producers is also being keenly awaited, with some observers saying the fast-spreading Delta Covid variant could cloud the outlook and force countries to slow their planned output increases.
Key figures around 1530 GMT
New York – Dow: UP 0.1 percent at 35,491.43 points
EURO STOXX 50: UP 0.2 percent at 4,200.41
London – FTSE 100: Closed for a holiday
Frankfurt – DAX 30: UP 0.2 percent at 15,887.31 (close)
Paris – CAC 40: UP less than 0.1 percent at 6,687.30 (close)
Tokyo – Nikkei 225: UP 0.5 percent at 27,789.29 (close)
Hong Kong – Hang Seng Index: UP 0.5 percent at 25,539.54 (close)
Shanghai – Composite: UP 0.2 percent at 3,528.15 (close)
Dollar/yen: UP at 109.90 yen from 109.82 yen
Pound/dollar: DOWN at $1.3757 from $1.3766
Euro/dollar: UP at $1.1800 from $1.1793
Euro/pound: UP at 85.77 pence from 85.64 pence
West Texas Intermediate: UP 0.3 percent at $68.91 per barrel
Brent North Sea crude: UP 0.3 percent at $72.95 per barrel