Stocks mostly higher as Powell signals tough on inflation

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Financial stock exchange market display screen board on the street

US stocks mostly rose Tuesday as US Federal Reserve chief Jerome Powell vowed to be tough on inflation on the eve of the latest US inflation data.

The JSE's All Share Index was flat, although Kumba rocketed almost 10% and other mining shares were also stronger. The rand was almost unchanged at R15.57/$.

Europe's major equity markets rebounded from recent falls as investors fished for bargain shares.

Asian stocks ended lower.

World oil prices recovered from Monday's drop, jumping more than 3 percent, but the dollar traded mixed.

Bitcoin meanwhile, the world's most popular cryptocurrency, rose above $42,000 just a day after having sunk below $40,000 on fears of reduced liquidity as a result of US monetary policy tightening.

In remarks at his Senate confirmation hearing for a second term as Fed chairman, Powell indicated that if inflation refused to go down then the central bank would be ready to increase rates as needed.

With inflation rising and employment recovering, "the economy no longer needs or wants the very highly accommodative policy" that has seen the Fed move rates to ultra-low levels and stimulate the economy with massive purchases of government and corporate bonds.

Returning to a normal monetary policy should not harm employment, he added.

Investors have been watching anxiously as monetary policymakers react to inflation, which has taken off as the economies recover from the shutdowns and disruptions at the beginning of the pandemic.

Higher interest rates are usually a negative for stocks, but investors have at times seemed reassured that policymakers are intent on restraining inflation which, if it got out of hand, could have a devastating effect on the global economy.

In late morning trading, the Dow was down less than 0.1 percent, while the S&P 500 was up 0.2 percent and the tech-heavy Nasdaq Composite showed a gain of 0.9 percent.

Several global central banks have already started hiking borrowing costs, including the Bank of England.

While the fast-spreading Omicron coronavirus variant plays on nerves, traders are now coming to terms with the imminent end to the pandemic era of ultra-cheap cash, which helped the economic recovery and fanned a global rally for nearly two years.

A pick-up in consumer activity, surging wages, supply chain problems and rising energy costs are combining to push inflation in several countries to highs not seen for a generation. That is ramping up pressure on central bankers to act before it gets out of control.

Markets are now awaiting the release of US inflation figures on Wednesday, which could play a major role in the Fed's timing.

"I'm not sure the inflation data tomorrow is going to put investors' minds at ease, with CPI (consumer price index) seen hitting a multi-decade high above 7 percent," said market analyst Craig Erlam at Oanda.

"A higher reading could spook investors once again just as equity markets appear to be stabilizing," he added.

Stocks mostly higher as Powell signals tough on inflation

US stocks mostly rose Tuesday as US Federal Reserve chief Jerome Powell vowed to be tough on inflation on the eve of the latest US inflation data.

The JSE's All Share Index was flat, although Kumba rocketed almost 10% and other mining shares were also stronger. The rand was almost unchanged at R15.57/$.

Europe's major equity markets rebounded from recent falls as investors fished for bargain shares.

Asian stocks ended lower.

World oil prices recovered from Monday's drop, jumping more than 3 percent, but the dollar traded mixed.

Bitcoin meanwhile, the world's most popular cryptocurrency, rose above $42,000 just a day after having sunk below $40,000 on fears of reduced liquidity as a result of US monetary policy tightening.

In remarks at his Senate confirmation hearing for a second term as Fed chairman, Powell indicated that if inflation refused to go down then the central bank would be ready to increase rates as needed.

With inflation rising and employment recovering, "the economy no longer needs or wants the very highly accommodative policy" that has seen the Fed move rates to ultra-low levels and stimulate the economy with massive purchases of government and corporate bonds.

Returning to a normal monetary policy should not harm employment, he added.

Investors have been watching anxiously as monetary policymakers react to inflation, which has taken off as the economies recover from the shutdowns and disruptions at the beginning of the pandemic.

Higher interest rates are usually a negative for stocks, but investors have at times seemed reassured that policymakers are intent on restraining inflation which, if it got out of hand, could have a devastating effect on the global economy.

In late morning trading, the Dow was down less than 0.1 percent, while the S&P 500 was up 0.2 percent and the tech-heavy Nasdaq Composite showed a gain of 0.9 percent.

Several global central banks have already started hiking borrowing costs, including the Bank of England.

While the fast-spreading Omicron coronavirus variant plays on nerves, traders are now coming to terms with the imminent end to the pandemic era of ultra-cheap cash, which helped the economic recovery and fanned a global rally for nearly two years.

A pick-up in consumer activity, surging wages, supply chain problems and rising energy costs are combining to push inflation in several countries to highs not seen for a generation. That is ramping up pressure on central bankers to act before it gets out of control.

Markets are now awaiting the release of US inflation figures on Wednesday, which could play a major role in the Fed's timing.

"I'm not sure the inflation data tomorrow is going to put investors' minds at ease, with CPI (consumer price index) seen hitting a multi-decade high above 7 percent," said market analyst Craig Erlam at Oanda.

"A higher reading could spook investors once again just as equity markets appear to be stabilizing," he added.

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