Futures indicated the exuberant mood looked set to continue in Europe, with the Eurostoxx 50 futures up 1.07%, German DAX futures 1.01% higher and FTSE futures up 0.59%.
Markets are pricing in a terminal rate of over 5% in June but anticipate the central bank to cut interest rates by the end of the year. Investors will parse though data before the Fed next meets in March to gauge where the economy is headed.
"There's always the danger in reacting too much to data and Powell seems to be aware of that," said Shane Oliver, head of investment strategy for AMP Capital in Sydney. "I am left with the impression that they will probably raise interest rates in March and then it gets 50/50 after that." Oliver said as the year proceeds, the focus for markets will shift from sticky inflation and elevated interest rates to the extent of the slowdown in economy and its impact on profits.
"But at the moment, the markets' a little hopeful that the Fed is getting close to the top and the recession might be avoided leading to a bit of relief rally," he said, cautioning there may be a bit of pullback in February.
Meanwhile, China's shares fell 0.2%, while Hong Kong's Hang Seng Index was 0.06% lower as U.S.-China balloon spat simmered and as some investors took profits after recent gains.
U.S. President Joe Biden in his State of the Union speech challenged Republicans to lift the U.S. debt ceiling and support tax policies that were friendlier to middle class Americans. Assailing oil companies for making high profits and corporate America for taking advantage of consumers, Biden used his prime time speech to outline progressive priorities of his Democratic Party that are anathema to many Republican lawmakers.
E-mini futures for the S&P 500 were barely moved. In the currency market, the dollar pulled back a bit after the speech. The dollar index , which measures the U.S. currency against six major rivals, was at 103.29, having dropped to as low as 102.99 in the previous session. The Japanese yen was flat at 131.08 per dollar, after surging 1.2% in the previous session. Oil prices were little changed on Wednesday, after gaining in the previous two days, with Brent crude at $83.66, down 0.04% on the day, after jumping 3.3% in the previous session. U.S. West Texas Intermediate (WTI) crude futures rose 0.17% to $77.27 per barrel, after jumping 4.1% in the previous session. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates YTD Global asset performance Asian stock markets ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Sam Holmes and Lincoln Feast)
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