Stocks diverge after Powell says rate hike possible

Federal Reserve boss Jerome Powell reminded investors that the door was still open for another interest rate hike (Jim WATSON)
Federal Reserve boss Jerome Powell reminded investors that the door was still open for another interest rate hike (Jim WATSON)

Wall Street closed higher but European stock markets nudged down Friday as investors digested warnings by central bank chiefs that the battle against inflation was not over.

US stocks ended the day with the Dow up 1.2 percent and the tech-heavy Nasdaq up 2.1 percent after falling the previous day on the back of Federal Reserve Chair Jerome Powell saying that the US central bank "will not hesitate" to raise interest rates again if necessary.

But European markets were sluggish and ended in the red after European Central Bank President Christine Lagarde forecast a "resurgence" of inflation after it slowed sharply last month.

Speaking at a Financial Times event, Lagarde also said that the ECB will not start cutting rates for at least "the next couple of quarters."

Data showing the UK economy stalled in the third quarter also weighed on London's FTSE 100 index, which ended off 1.3 percent while Frankfurt and Paris lost almost one percent.

Both the Fed and ECB paused their rate-hike campaigns at their last meetings as consumer price rises have slowed, but they have suggested they would stay higher for longer as inflation remains above their two-percent targets.

Equities had been rallying since last week after Fed officials hinted that their long-running tightening cycle may be at an end.

But Powell told an International Monetary Fund conference Thursday that progress toward reaching two-percent inflation was "not assured."

"If it becomes appropriate to tighten policy further, we will not hesitate to do so," he said.

The yield on the 10-year Treasury note eased on Friday after US government bond yields rose a day earlier.

Experts said the movement may have been linked to a ransomware attack on the US arm of China's largest bank, the ICBC, which disrupted the US Treasury market.

- Key figures around 2230 GMT -

New York - Dow: UP 1.2 percent at 34,283.10 points (close)

New York - S&P 500: UP 1.6 percent at 4,415.24 (close)

New York - Nasdaq Composite: UP 2.1 percent at 13,798.11 (close_

London - FTSE 100: DOWN 1.3 percent at 7,360.55 (close)

Paris - CAC 40: DOWN 1.0 percent at 7,045.04 (close)

Frankfurt - DAX: DOWN 0.8 percent at 15,234.39 (close)

EURO STOXX 50: DOWN 0.8 percent at 4,197.36 (close)

Tokyo - Nikkei 225: DOWN 0.2 percent at 32,568.11 (close)

Hong Kong - Hang Seng Index: DOWN 1.8 percent at 17,203.26 (close)

Shanghai - Composite: DOWN 0.5 percent at 3,038.97 (close)

Euro/dollar: UP at $1.0686 from $1.0671 on Thursday

Pound/dollar: DOWN at $1.2224 from $1.2223

Dollar/yen: UP at 151.47 yen from 151.35 yen

Euro/pound: UP at 87.39 pence from 87.28 pence

Brent North Sea crude: UP 1.8 percent at $81.43 per barrel

West Texas Intermediate: UP 1.9 percent at $77.17 per barrel