Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, May 18, 2018. (Photo: Michael Nagle/Bloomberg) Equities in Australia and South Korea advanced to push a region-wide benchmark of shares higher despite fluctuating trading in Hong Kong, mainland China and Japanese shares. US futures were largely flat after the S&P 500 advanced more than 1% Tuesday. The tech-heavy Nasdaq 100 outperformed major benchmarks, climbing more than 2%.
Australian bonds dropped in early trading following declines in Treasuries on Tuesday, which partly reversed in early Wednesday trading. An index of the dollar was steady after its fall on Tuesday snapped a three-day rally.
The yen steadied after rallying more than 1% on Tuesday, while the Aussie edged higher after also gaining more than 1% following the Reserve Bank of Australia’s decision to increase interest rates on Tuesday.
Powell’s sober comments echoed those made after last week’s FOMC meeting, soothing traders who were expecting the Fed chief to push back on the loosening of financial conditions and Friday’s bumper jobs report. Powell highlighted that disinflation has begun, and that further hikes will likely be needed if the jobs market remains strong.
In separate comments, Minneapolis Fed president Neel Kashkari said the Fed would likely have to raise interest rates to 5.4% at the top of its target range given the strength in the US jobs market. The Fed increased rates 25 basis points last week to a band of 4.5% to 4.75%.
“The important takeaway is that Powell had a chance to signal a shift to a more aggressive posture and he didn’t take it,” wrote Bill Adams, chief economist for Comerica Bank in Dallas. “In the near-term, the Fed will likely continue to make one [or perhaps two] more hike[s] before going on hold.”
Investors will be paying close attention to shares in Adani companies after its flagship jumped by the most since Hindenburg Research’s scathing report two weeks ago. Hedge fund and distressed debt investors have begun snapping up Adani company bonds. Ratings firm Moody’s said in a report that Indian banks’ exposure to the Adani Group is not large enough to affect their credit quality.
Elsewhere in markets, the price of oil extended gains after a 4.1% surge on Tuesday, its biggest one-day move since November, helped along by a rebound in demand from China.
Traders will also keep a close eye on Joe Biden’s speech to a joint session of Congress on Tuesday evening in Washington in light of renewed tensions with China and a brewing showdown with House Republicans over raising the federal debt ceiling. BM/DM