# European shares hit nine month high, dollar wobbles after Powell remarks
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-02-08
Category: TRADING
Category URL: https://financedigest.com/category/trading
Meta Title: Global Shares Jump as Powell Strikes Dovish Tone
Meta Description: As global shares jump and currencies rise against the dollar, investors welcome a dovish tone from Powell but ECB policy changes impact European bonds.
URL: https://financedigest.com/european-shares-hit-nine-month-high-dollar-wobbles-after-powell-remarkshtml

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By Alun John

LONDON (Reuters) – Global shares jumped and most currencies rose against the dollar on Wednesday as investors discerned a dovish tone in comments from Federal Reserve Chair Jerome Powell, though a policy tweak by the ECB meant European bonds sat out the rally.

MSCI’s world share index rose 0.3%, heading back towards the nine-month high it hit in early February, while Europe’s STOXX 600 index gained 0.85% to a fresh nine-month peak.

Major benchmarks in France, Britain and Germany were all comfortably in positive territory too, after [Wall Street](https://www.financedigest.com/wall-street-drops-treasury-yields-gyrate-on-fed-chairman-powells-remarks.html "Wall Street drops, Treasury yields gyrate on Fed Chairman Powell’s remarks") gained overnight and Asia rose earlier in the day.

U.S. [share futures were around 0.4% lower](https://www.financedigest.com/britains-next-sees-lower-clothing-inflation-shares-dip-on-cautious-outlook.html "Britain’s Next sees lower clothing inflation, shares dip on cautious outlook") ahead of Wednesday’s open, however.

In an eagerly awaited speech on Tuesday, Powell reiterated that disinflation has begun but warned Friday’s eye-popping [jobs report showed why the battle against inflation](https://www.financedigest.com/stocks-mixed-dollar-gains-after-robust-inflation-jobs-data.html "Stocks mixed, dollar gains after robust inflation, jobs data") will “take quite a bit of time.

The data showed the surprising addition of 517,000 new jobs in January and stoked [fears that the tight labour market may compel the Fed](https://www.financedigest.com/asian-shares-gain-as-fears-about-rapid-fed-hikes-bank-crisis-fade.html "Asian shares gain as fears about rapid Fed hikes, bank crisis fade") to remain hawkish. [Investors were relieved that that Powell](https://www.financedigest.com/investors-eye-lower-wall-street-on-powell-nerves.html "Investors eye lower Wall Street on Powell nerves") did not lean further into this argument.

The [market is looking for a dovish message](https://www.financedigest.com/premium-a2p-and-p2a-messaging-market-surpass-revenues-worth-us-75-bn-in-2029.html "Premium A2P and P2A Messaging Market surpass revenues worth US$ 75 Bn in 2029") where it can almost regardless. [Powell said effectively the terminal rate could be higher than the market](https://www.financedigest.com/jittery-markets-attempt-risk-on-rally-while-waiting-for-powell.html "Jittery markets attempt risk-on rally while waiting for Powell") expects, but the Nasdaq and S&P500 were up. I think they’re wrong,” said Ben Jones, director of macro research at Invesco.

Aggressive rate increases by the Fed and other central banks last year to tame [inflation hurt shares](https://www.financedigest.com/european-shares-set-for-weekly-gain-on-u-s-inflation-outlook.html "European shares set for weekly gain on U.S. inflation outlook") and boosted the dollar, but those trends have reversed this year on signs that inflation has started to slacken, raising hopes of rate cuts towards the end of 2023.

“At the moment (markets are) all about the Fed, but at some point it has to morph into being about growth and earnings growth as well,” said Jones.

Earnings boosted European oil and gas stocks, the top regional sector on Wednesday with a gain of 2%, as Finnish refiner Neste added 10% and Norwegian oil and gas giant Equinor rose 7% after each reported a [strong quarter](https://www.financedigest.com/italys-mps-sees-safe-habour-ahead-after-strong-quarter.html "Italy’s MPS sees ‘safe habour’ ahead after strong quarter").

French [bank Societe Generale fell 3.7% though after a five-fold hike](https://www.financedigest.com/bank-of-englands-mann-doubles-down-on-backing-for-rate-hikes.html "Bank of England’s Mann doubles down on backing for rate hikes") in bad loan provisions.

Powell’s avoidance of a more hawkish tone also guided currency markets, with the [euro rising as much as 0.29% against the dollar](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure"), and the pound gaining 0.49% at one point. \[FRX/\]

The [dollar selling also reflected what Powell](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate") didn’t say,” said MUFG FX analysts in a morning note to clients.

U.S. [Treasuries firmed a little with the benchmark 10-year yield](https://www.financedigest.com/wall-st-flutters-treasury-yields-ease-as-powell-resumes-testimony.html "Wall St flutters, Treasury yields ease as Powell resumes testimony") down 3 basis points (bps) to 3.6547% and the two year yield down 4 bps. \[US/\]

[Yields move inversely to prices](https://www.financedigest.com/stocks-jump-as-treasury-yields-ease-and-oil-prices-sell-off.html "Stocks jump as Treasury yields ease and oil prices sell off").

In Europe, however, bonds continued to sell off following a sharp tumble the previous day after the [European Central Bank](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters") said it would cut the interest rate it pays governments on deposits. \[GVD/EUR\]

Two-year German yields, the most sensitive to any shifts in [expectations for interest rates and inflation](https://www.financedigest.com/dollar-drops-as-inflation-cools-more-than-expected.html "Dollar drops as inflation cools more than expected"), rose by as much as 11 bps to 2.725% in early trading, their highest since Jan. 3.

The other overnight news event was U.S. President Joe [Biden’s State of the Union speech](https://www.financedigest.com/stocks-dollar-pause-ahead-of-powell-biden-speeches.html "Stocks, dollar pause ahead of Powell, Biden speeches") in which he challenged Republicans to lift the U.S. [debt ceiling](https://www.financedigest.com/dollar-eases-before-inflation-data-with-nagging-worries-over-debt-ceiling-impasse.html "Dollar eases before inflation data, with nagging worries over debt ceiling impasse") and support tax policies that were friendlier to middle class Americans.

Assailing [oil companies for making high profits](https://www.financedigest.com/big-oil-doubles-profits-in-blockbuster-2022.html "Big Oil doubles profits in blockbuster 2022") 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.

[Oil prices](https://www.financedigest.com/oil-prices-steady-after-u-s-stockpile-swell.html "Oil prices steady after U.S. stockpile swell") ticked up on Wednesday, continuing this week’s gains, with Brent crude at $84.05, up 0.4% on the day. U.S. crude rose 0.8% to $77.84 per barrel, helped by the slightly softer dollar. \[O/R\]

Gold likewise rose, with the spot [price edging](https://www.financedigest.com/oil-prices-edge-down-recession-fears-back-in-focus.html "Oil prices edge down, recession fears back in focus") up 0.1% to $1876.5 per ounce.

(Additional reporting by Ankur Bannerjee Editing by Kirsten Donovan)


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