London (AFP) – Stock markets traded mixed on Wednesday amid a bout of profit-taking, with the new head of the Federal Reserve, Kevin Warsh, indicating that taming inflation is his top priority. Wall Street’s main indices opened lower, with the Dow coming off a second straight record close and the tech-rich Nasdaq posting its best quarterly gain in six years with a 21.4 percent increase. However, the profit-taking was short-lived, with the market pushing higher during the morning session in New York. European stocks ended the day mostly lower, while Asian stock markets made some gains after Wall Street’s strong performance on Tuesday.
Stock markets globally enjoyed a largely fruitful first half of the year thanks to a surge in tech stocks driven by the AI boom, but recent disruptions in the sector have revived concerns that a bubble has formed. While markets have endured such issues in the past and bounced back to reach new heights, there is talk that the latest pullback might be more lasting. Investors were listening keenly to new Fed chief Warsh, who spoke Wednesday at a bankers’ conference in Portugal. Warsh “once again refused to offer forward guidance and said they are ‘in the price stability business’,” noted Forex.com analyst Fawad Razaqzada.
At his first meeting as Fed chair last month, Warsh emphasized pushing inflation down over ensuring maximum employment, leading investors to increasingly anticipate that the central bank will hike interest rates in the coming months. Recent data has confirmed that inflation is running above the Fed’s 2.0 percent target, while the U.S. economy remains robust. “Against that backdrop, it is hardly surprising to see Warsh make any attempts to dampen market expectations for further tightening,” Razaqzada added. This puts Thursday’s U.S. non-farm payrolls figures for June in focus, with a strong reading likely to ramp up expectations of a rate hike and potentially deal a fresh blow to stocks, while a below-forecast reading could provide a boost.
June private sector job growth data released Wednesday came in below expectations and also showed a slowdown from May. The dollar continued to benefit from talk of rate hikes, with the yen hitting a fresh 40-year low against the U.S. currency before rebounding slightly. “The strong dollar is proving a nightmare for Japan’s policymakers,” stated Trade Nation analyst David Morrison. He noted that the value of the yen has sunk below the level that triggered intervention to prop up the currency in April. “It increasingly appears like a game of chicken between traders and the authorities as to when intervention may take place,” he added. The prospect of a higher interest rate differential is fueling what investors call the carry trade – borrowing in yen with low rates and then investing in higher-yielding dollar assets.
Elsewhere, oil prices dropped despite U.S.-Iran concerns after the two exchanged fresh fire.
**Key figures around 1530 GMT:**
– New York – Dow: UP 0.4 percent at 52,536.83 points
– New York – S&P 500: UP 0.3 percent at 7,519.19
– New York – Nasdaq Composite: UP less than 0.1 percent at 26,231.98
– London – FTSE 100: DOWN 0.2 percent at 10,478.34 (close)
– Paris – CAC 40: DOWN 0.8 percent at 8,337.29 (close)
– Frankfurt – DAX: UP 0.2 percent at 25,040.28 (close)
– Tokyo – Nikkei 225: UP 0.6 percent at 70,474.96 (close)
– Shanghai – Composite: UP 0.4 percent at 4,112.45 (close)
– Hong Kong – Hang Seng Index: Closed for a holiday
**Exchange Rates:**
– Dollar/yen: DOWN at 162.43 yen from 162.59 yen on Tuesday
– Euro/dollar: DOWN at $1.1392 from $1.1418
– Pound/dollar: UP at $1.3277 from $1.3256
– Euro/pound: DOWN at 85.81 pence from 86.13 pence
**Oil Prices:**
– Brent North Sea Crude: DOWN 2.0 percent at $71.46 a barrel
– West Texas Intermediate: DOWN 0.6 percent at $68.37 a barrel
© 2024 AFP
