European markets are on an upward trajectory following a spectacular rally on Wall Street late Wednesday. In what traders now call the Powell rally the DJIA closed 2.5% higher and the Nasdaq 2.95% after the Fed chairman Jerome Powell signalled that the Fed might slow down the pace of its planned hikes.
Powell, who was recently repeatedly criticised by President Trump over the Fed’s stringent approach to the US economy, told a New York gathering that the interest rates are “just below the broad range of estimates of the level that would be neutral for the economy”.
Previously investors expected that the next rate hike could come as soon as the Fed’s meeting on 19 December and that there would be at least two more hikes next year but Wednesday’s comment was, rightly or wrongly, taken as a sign that the hikes would either be delayed or there would be fewer of them. It alleviated some of the fears about a slowdown in the US economy which had triggered a 6.5% decline in the DJIA and 12% decline in the Nasdaq in November.
Thomas Cook books loss
Thomas Cook shares were among the more volatile ones this morning, dropping 1.94% after the company reported a sharp drop in full year profits but then clawing their way back as the morning progressed. The tour operator blamed its pretax loss of £53 million on the hot UK summer which meant that more British tourists stayed at home than usual but the growth of its airline unit somewhat softened the loss. The travel company is pinning its hopes on the airline segment to help boost its 2019 profits particularly as it increased by 11% this year but it also expects to reduce exceptional items and boost underlying growth over the coming year.
China credit warning
When Asian markets open Friday they will chew on a comment from rating agency Standard & Poor’s expressing concerns that China’s policy makers may loosen their lending criteria to soften the blow from the US-China trade dispute. In an interview with Reuters, S&P’s Asia-Pacific director said that although the agency does not expect the tariff dispute to trigger a downgrade for China’s sovereign rating next year the agency is still concerned about how a protracted trade conflict will affect the country’s lending policy. As the comment was published after Asian markets closed there was no immediate impact on trading but it may leave a trace in the currency and bond markets tomorrow.