Interest rates could potentially be reduced, sparking debate, as hinted by Powell's recent remarks
In a significant turn of events, US Federal Reserve Chair Jerome Powell delivered a speech at the annual central bank symposium in Jackson Hole, causing ripples in global markets.
Powell's remarks hinted at a potential US interest rate cut in September, with investors interpreting his speech as a signal of monetary policy easing. This news sent stocks soaring, with defense stocks gaining momentum as peace talks in Ukraine stalled. However, shares of CTS Eventim continued to decline in the afternoon, following an unexpected profit drop the previous day.
Powell also addressed the impact of tariffs, cautioning about inflation risks and the potential for a more lasting inflation dynamic. He stated that the Fed wants more clarity on how tariff increases would affect inflation and the labor market. Powell warned about risks to employment and highlighted the unusual labor market balance due to a significant slowdown in both labor supply and demand.
The Euro was at 1.1727 dollars after Powell's speech, up 1%. The 10-year Bund yield fell to 2.72% from 2.76% on Thursday. Suedzucker, Europe's largest sugar producer, lowered its full-year revenue and earnings guidance due to low world market prices.
In corporate news, Kepler Cheuvreux issued a buy recommendation for DHL Group shares but raised doubts about the logistics company's earnings guidance. Akzo Nobel shares caught investors' attention as financial investor Cevian acquired around a 3% stake in the "Dulux" paint provider, following a similar move in the past.
The German benchmark index closed at 24,363 points, up 0.3%. Rheinmetall, Renk, and Hensoldt were among the top performers in Germany, gaining up to 3%. Interestingly, two Fed regional presidents dissented from the majority decision of the Federal Open Market Committee, an unusual move that hasn't occurred since 1993.
In a surprising development, Powell acknowledged risks to the labor market but also highlighted the danger of persistent inflation. This risk, he stated, needs to be assessed and managed. The market is now awaiting further clarification on the Fed's monetary policy decisions and their potential impact on global economies.
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