Published: Mon, January 07, 2019
Medical | By Vicki Mclaughlin

Global stocks soar on dovish Fed, strong U.S. jobs data

Global stocks soar on dovish Fed, strong U.S. jobs data

Data released earlier on Friday showed USA employers added the most workers in 10 months as wage gains accelerated. Sliding equity prices, weakness overseas and mixed economic data at home have prompted calls for the Fed to put rates on hold, but the U.S. labor market remains strong. "Can we wait?", Cleveland Federal Reserve Bank President Loretta Mester said in an interview with Reuters.

Trump has for months criticized the Fed chief for raising rates, and Bloomberg News reported December 21 that the president had discussed firing Powell.

Both of those messages cheered stock market investors who had been anxious about Trump's repeated attacks on his hand-picked choice to lead the nation's central bank and also the Fed's seemingly inexorable march to higher rates.

Powell called the December jobs report "very strong" and said US data seems "to be on track to sustain good momentum into the new year".

The December job report also indicated that unemployment rate was up 0.2 percentage point month-on-month to 3.9 percent, and that average hourly earnings for all employees on private nonfarm payrolls rose 11 cents, or 0.4 percent over November, to 27.48 USA dollars.

The pace of Fed rate hikes and the lowering of the balance sheet, which tends to put upward pressure on interest rates, had both been concerns of investors in recent months.

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Echoing a more sympathetic tone recently espoused by some of his colleagues, Powell said the Fed was "listening" to markets and would balance the steady flow of strong economic data against the array of risks - from slowing global growth to worries about the U.S.

"Particularly with the muted inflation readings that we've seen coming in, we will be patient as we watch to see how the economy evolves", Powell told the American Economic Association in Atlanta.

The U.S. central bank hiked interest rates four times last year, including in December when policy-makers' forecasts pointed to two more rises this year. "The Fed has wilfully ignored trade and interest rate risks while talking a hawkish game". Fed watchers have said that the bar is very high for the president to remove Powell "for cause" as the law appears to require, provided Powell decides to fight the dismissal in court.

When asked whether he would comply with a resignation request by Trump, Powell said, "No". But some investors have anxious that that process could push long-term rates higher at a time when the economy was slowing.

In response to the observation that the Treasury issues more securities when the Fed's balance sheet holdings mature, Powell said, "We don't believe our issuance is an important part of the story in the market turbulence that began in the fourth quarter of a year ago". Asked if he had had any face-to-face meetings with Trump, Powell said he had not although he said previous Fed leaders have had discussions from time to time with previous presidents.

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