Lacking the tech support of its Nasdaq and S&P peers, the Dow Jones nevertheless opened sharply higher following Jerome Powell’s online Jackson Hole address.
Confirming what has been suspected for a while, the central bank chief stated that the Federal Reserve would now be targeting 2% inflation as an average, rather than a fixed aim, freeing up the FOMC to moderately overshoot that target when needed. In essence, interest rates are staying near zero for a long, long time.
The Fed will also now be taking a similarly more chilled approach to employment, changing the wording of its policy decisions basis to reflect the ‘view that a robust job market can be sustained without causing an outbreak of inflation’.
Beyond that the speech was pretty surprise free, Powell saving plenty for September’s official Fed meeting. And while this didn’t do anything for the wider markets, the US indices celebrated his statement.
Adding 250 points, the Dow Jones shot past 28550, surpassing the intraday highs struck on Tuesday. That leaves the Dow at its best price in 6-months, and once again around 1000 points off its own record peak.
There was also some positive – well, relatively positive – data for US investors to digest. The second look at the Q2 GDP reading saw that quarter’s contraction revised down from 32.9% to 31.7% at the annualised rate, while pending home sales smashed estimates at 5.9%.
The one notable disappointment was, once again, the weekly jobless claims number, with hit 1.006 million against the 1 million forecast. It was, however, down on last Thursday’s 1.104 million.
In contrast the European indices all languished in the red. The FTSE slipped 0.2%, with the DAX and CAC down 0.6% and 0.5% respectively.
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