NEW YORK/LONDON :A global equities gauge rose to record levels on Wednesday while U.S. Treasury yields edged down with comments from Federal Reserve Chair Jerome Powell fuelling hopes for interest rate cuts as investors awaited key U.S. inflation data.

Powell told lawmakers in Congress that while he was not yet ready to declare inflation beaten, the U.S. remained on a path back to stable prices and continued low unemployment and that the Fed was “very focused on staying on that path.”

The U.S. dollar edged lower while the euro rose slightly and sterling rallied as comments from the Bank of England’s chief economist dampened expectations for an August rate cut.

On Tuesday, Powell had told Congress that since the U.S. economy was no longer running too hot the central bank has to weigh risks and would be able to cut rates once inflation makes more progress.

“Powell’s reiterating the message that if inflation continues to cool the Fed should be ready to move rates. It does also feel like he’s added a bit more emphasis on the labor market as well,” said Mona Mahajan senior investment strategist at Edward Jones in New York. “It looks like September and December are back on the table for rate cuts.”

Added to Powell’s comments, Mahajan said the slight dip in bond yields appeared to be supporting equities too.

Investors are also waiting for June’s Consumer Price Index report (CPI), due out on Thursday, and the Producer Price Index (PPI) report, which comes on Friday, and expect the data to add to optimism that the Fed will be able to cut rates this year.

Traders are currently pricing in a 46 per cent probability that the Fed will have cut rates by two notches by the end of December’s meeting and a 70 per cent probability for the first cut in September, according to CME Group’s FedWatch tool.

On Wall Street, at 02:43 p.m. the Dow Jones Industrial Average rose 221.87 points, or 0.56 per cent, to 39,513.84, the S&P 500 gained 39.89 points, or 0.72 per cent, to 5,616.87 and the Nasdaq Composite gained 181.01 points, or 0.98 per cent, to 18,610.30.

MSCI’s gauge of stocks across the globe rose 5.22 points, or 0.64 per cent, to 823.00 while Europe’s STOXX 600 index rose 0.91 per cent.

In Treasuries, the yield on benchmark U.S. 10-year notes fell 1.6 basis points to 4.284 per cent, from 4.3 per cent late on Tuesday while the 30-year bond yield fell 2 basis points to 4.4749 per cent.

The 2-year note yield, which typically moves in step with interest rate expectations, rose 0.3 basis points to 4.6305 per cent, from 4.628 per cent late on Tuesday.

In currencies, the dollar edged lower with the prospect for rate cuts still in focus as Powell wrapped up his testimony.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.05 per cent at 105.07, with the euro up 0.07 per cent at $1.082.

Against the Japanese yen, the dollar strengthened 0.28 per cent to 161.76. Sterling strengthened 0.44 per cent at $1.2839.

In commodities, oil prices settled higher after data showed that a jump in U.S. refining activity last week prompted a bigger draw than expected from gasoline and crude inventories.

U.S. crude settled up 0.85 per cent, or 69 cents at $82.10 a barrel and Brent settled at $85.08 per barrel, up 0.5 per cent, or 42 cents on the day.

Gold prices rose on raised expectations for U.S. interest rate cuts, while investors waited for Thursday’s inflation data with a view to bolstering those expectations.

Spot gold added 0.33 per cent to $2,371.38 an ounce. U.S. gold futures gained 0.72 per cent to $2,377.00 an ounce.


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