A gap-up opening is on the cards as the Federal Reserve’s less hawkish tone lifted investors’ appetite for riskier assets and sent yields and the dollar lower.
After raising interest rates by 50 basis points and outlining plans to reduce the near $9 trillion balance sheet, the Fed made it clear that larger 75-basis-point increases weren’t in play for the next couple of meetings.
Fed Chair Jerome Powell’s comments on inflation and growth outlook also bolstered hopes of a possible soft landing for the world’s largest economy.
“I do believe we’re going to see solid growth in the coming year,” U.S. Treasury Secretary Janet Yellen said in an interview at a Wall Street Journal event.
Asian markets followed Wall Street higher, but overall gains were modest after a survey showed China’s services sector activity contracted at the second-steepest rate on record in April.
Gold extended a rebound as the dollar corrected with Treasury yields. Oil rose further in Asian trade after climbing more than 5 percent on Wednesday.
The Bank of England is expected to opt for a fourth consecutive interest rate hike later today to rein in inflation, which hit a 30-year high of 7 percent in March.
U.S. stocks gained the most since May 2020 overnight after Powell said that inflation is flattening out and that the economy is continuing to perform well.
The Dow jumped 2.8 percent, the tech-heavy Nasdaq Composite surged 3.2 percent and the S&P 500 added 3 percent despite weak private sector job growth and service sector activity readings.
European stocks closed lower on Wednesday as the European Union announced a new sanctions package against Russia, including an embargo on Russian oil.
The pan European Stoxx 600 lost 1.1 percent. The German DAX dropped half a percent, France’s CAC 40 index shed 1.2 percent and the U.K.’s FTSE 100 dipped 0.9 percent.
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