Thursday 11 July 2019 11:47 am

World markets rally amid growing hopes of Fed interest rate cut

FTSE and other European markets enjoyed a bump this morning as expectations of an interest rate cut in the US mounted.

Caution expressed yesterday by the chairman of the US Federal Reserve, Jay Powell, has been interpreted as a likely nod that rate cuts would happen at the end of this month.

Read more: Powell hints at rate cut with gloomy statement

In late-morning trading, the FTSE 100 was trading up 0.03 per cent at a price of roughly 7,532, while the Cac rose 0.15 per cent to 5,575 and the Dax was flat at 12,371.

In the US, the S&P 500 climbed 0.45 per cent to 2,993, the Dow rose 0.29 per cent to 26,860 and the NASDAQ Composite was 0.75 per cent higher at 8,202.

Powell yesterday boosted the market’s expectations that the first interest rate cut in ten years will come this month with a gloomy testimony to a congressional committee.

In a prepared statement Powell said “trade tensions and concerns about global growth have been weighing on economic activity and the outlook” in the US.

Domestically, business investment has slowed notably while manufacturing output continued to decline, Powell said.

He added that there was “a risk that weak inflation will be even more persistent” than previously thought.

Read more: UK economic growth beats expectations

David Madden, market analyst at CMC Markets UK, said: “Stock markets in Europe are higher this morning as traders feel the Federal Reserve will lower rates in the wake of the update from Fed chief, Jerome Powell yesterday.

“The central banker said the Fed would ‘act as appropriate’ to help the US economy, and he cautioned that ‘crosscurrent’ have weighed in the country’s outlook.

“Powell highlighted that the unemployment rate is near a 50 year low, but he did leave the door open to cutting rates, and that acted as s green light to the bulls.”

Better-than-expected GDP figures released yesterday also appeared to boost property giants on London’s stock exchange.

Fiona Cincotta, senior market analyst at Cityindex, said: “While stocks seem to be having a field day the currency markets are a bit more cautious given that Jay Powell will continue his testimony for a second day today.”

She added: “His comments caused the dollar to yo-yo throughout the previous session ending with a plunge and this morning the greenback continued downhill against most majors. This is good news for the pound which otherwise had little by way of domestic news to lift it off its current lows.”