MARKET WRAP: Powell clears way for 2021 taper, FTSE higher, USD falls By Investing.com

Key Points

• FTSE 100 closing price of 7,150, +0.35%
• Powell clears way for taper this year
• Powell attempts to distance rate hike timing with end of bond purchases
• Stocks higher after Powell, USD falls
• Oil rallies on Hurricane fears
• Bitcoin steadies near $48,000

By Samuel Indyk

Investing.com – All eyes were on the Federal Reserve Chair Jerome Powell’s keynote speech at the Jackson Hole Symposium. With most Fed members appearing to favour tapering this year, focus was on whether that view was shared by the influential Chair and how it might look when it kicks off.

Powell said he thought it could be appropriate to begin tapering “this year” as there has been “clear progress” towards the Fed’s maximum employment goal, although the criteria has not been met quite yet.

Powell appeared relatively cautious, saying the Delta variant presents a near-term risk. Powell also added that the timing and pace of a reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate hikes.

The comments gave a lift to stocks and weighed on the USD with Powell being less committal to timing of tapering than some of the more hawkish regional Fed presidents over the last two days.

The S&P 500 hit a new high above 4,500 while the FTSE 100 also held on to gains.

There was one notable underperformer in the UK. Just Eat (LON:JETJ) shares declined over 7% after New York City’s council voted to cap the commission rates that food delivery services could charge. Just Eat recently bought GrubHub to expand its presence in the US, but the return on its investment may take longer to realise if the company is capped by how much it can charge.

The US Dollar was lower after the Powell comments, although moves were still rather subdued. EUR/USD briefly broke above 1.1800 while GBP/USD moved to a one-week high ahead of the long weekend in the UK.

WTI and Brent crude futures were higher as the USD declined and as Tropical Storm Ida heads towards the oil producing Gulf of Mexico. The National Hurricane Centre said Ida is expected to be a dangerous hurricane when it reaches the northern Gulf Coast on Sunday and oil companies such as BP (LON:BP), Chevron (NYSE:CVX), and BHP (LON:BHPB) have all taken measures at their offshore platforms and refineries which could impact production.

Cryptocurrencies had been steady before the speech from Powell but the improving risk sentiment buoyed Bitcoin and other major cryptos. Bitcoin moved back above $48,000 heading towards the weekend after finding support around $46,800-$47,000.

Subscribe to Investing.com UK here