**ASX Set to Rally as Powell’s Comments Lift Global Markets**
*Original reporting by James Thomson, The Australian Financial Review*
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Australia’s stock market is poised for gains, buoyed by a surge on Wall Street after US Federal Reserve Chair Jerome Powell reassured investors about the central bank’s approach to monetary policy. Powell’s latest remarks, interpreted by markets as less hawkish than feared, ignited a global buying spree that looks set to lift the ASX in Friday trading.
**Wall Street’s Rally Sparks Optimism**
Markets worldwide responded enthusiastically to Powell’s statement, as investors had braced for a more assertively restrictive policy stance. Instead, Powell struck a tone that investors perceived as balanced, acknowledging ongoing progress in the battle against inflation, while leaving future policy moves open-ended. The result was a sharp rebound in risk assets, with tech stocks leading the charge.
– The S&P 500 climbed almost 2 percent, with Apple, Microsoft, and Nvidia all surging more than 3 percent each
– The Dow Jones Industrial Average added 1.5 percent
– The tech-heavy Nasdaq outperformed both, jumping just over 2.2 percent
The robust gains reflect relief that the Fed does not intend to accelerate rate hikes in the short-term, even as it remains vigilant about inflation.
**Powell’s Comments at the Centre**
Powell’s remarks at a policy forum reiterated the Fed’s commitment to its inflation target, yet he also signaled satisfaction with recent economic data indicating cooling price pressures. Key points included:
– Recognition that inflation remains “well above” the target, but is declining
– Caution against declaring victory too soon, yet praise for recent moderation in both goods and services inflation
– An insistence that policy decisions will be “data-dependent,” with flexibility to pause or adjust rate hikes as needed
Markets interpreted these comments as grounds for optimism, especially given concerns that the Fed might feel compelled to tighten further given strong labor market data earlier in the week.
**Australian Markets Set to Open Stronger**
Futures contracts on the ASX 200 pointed to an early rise of more than 1 percent at the open, mirroring the positive lead from US equities. Australian investors have been jittery amid a patchwork of mixed earnings from major companies in recent weeks, so the broad rally offers a reprieve.
Local factors at play include:
– Ongoing corporate earnings season, with several blue-chip firms reporting results
– Continuing speculation about the Reserve Bank of Australia’s rate trajectory, especially as local inflation remains elevated
– Rising resource prices, with commodity markets buoyed by renewed optimism about global growth
Financials, technology, and mining stocks are expected to be among the main beneficiaries when trading commences.
**What Drove the Buying Spree?**
Multiple forces came together to fuel the rally:
1. **Improved Data and Inflation Outlook**
– Recent US CPI and PPI data showed further moderation in consumer and producer prices
Read more on AUD/USD trading.