Global Markets React to Federal Reserve's Inflation Remarks

Shares rose and bond yields dipped after Federal Reserve Chair Jerome Powell's encouraging remarks on inflation, raising hopes for imminent U.S. rate cuts. Meanwhile, euro zone bond yields, particularly in France and Italy, dipped amid reduced political risk. The New Zealand dollar fell post-central bank decisions, while Australia’s dollar rallied.

Shares climbed and bond yields dipped on Wednesday following remarks by Federal Reserve Chair Jerome Powell on inflation, raising expectations for imminent U.S. rate cuts. The pan-European STOXX 600 index rose 0.6% by 1040 GMT, led by gains in travel and leisure shares. MSI's index of Asia-Pacific shares outside Japan eased 0.08%, maintaining proximity to a two-year high hit earlier this week.

Euro zone bond yields in France and Italy dipped as investors unwound their political risk premiums. Germany's 10-year bond yield fell 6 basis points (bps) to 2.52%, France's 10-year yield dropped 9 bps to 3.163%, and Italy's 10-year yield decreased by 10 bps to 3.858%.

Globally, speculation over interest-rate cuts has dominated markets. The New Zealand dollar fell on Wednesday after its central bank held its cash rate steady at 5.5%, signaling confidence in controlling inflation. The Aussie dollar rallied 0.9% against the New Zealand dollar, indicating potential rate increases in Australia due to stubborn inflation.

Markets have been energized by growing expectations of a Federal Reserve easing cycle starting in September. Stocks rose with S&P 500 futures gaining 0.15% and Nasdaq futures firming 0.29%. Meanwhile, the dollar traded close to three-week lows as Powell's cautious remarks kept risk sentiment grounded.

In commodities, oil prices were volatile amid conflicting factors. Brent futures fell to $84.53 a barrel, and WTI crude eased to $81.31 per barrel. Gold gained 0.36% to $2,372.12 an ounce.

(With inputs from agencies.)