Federal Reserve Board Chairman Jerome Powell speaks during his news conference after a Federal Open Market Committee meeting in Washington on Dec. 19, 2018.Yuri Gripas/Reuters
Stocks surged Friday after the Federal Reserve chairman, Jerome Powell, said the central bank’s approach to monetary policy would remain flexible in the face of market turbulence and signs that the global economy is slowing.
The S&P 500 rose more than 3 per cent, while the Nasdaq composite was up more than 4 per cent. Stocks were already higher before Mr. Powell’s comments, after Labor Department figures showed robust gains in hiring, but the rally picked up speed as he spoke on Friday morning.
The Fed’s plans for future interest rate increases have become a critical concern for investors as stocks have stumbled in recent months. Markets slumped last month after the central bank raised rates and policy-makers suggested it would continue on a course of tightening its monetary policy. Mr. Powell, acknowledging the market’s concerns that rising interest rates would dampen the economy, said the central bank could adjust its plans if conditions warrant.
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Even before his remarks, stocks had been higher following gains in Europe and parts of Asia overnight. One notable exception among global markets was Japan, where shares fell in the first trading day of the new year.
Friday’s gains came after a punishing day on Thursday, driven in part by news that Apple Inc. was reducing its revenue expectations for the first time in 16 years.
Stock investors have been looking for fresh evidence about the state of the economy, and Friday they got a sign that it remains in good health. Employers in the United States added 312,000 jobs last month, well above Wall Street’s expectations and the biggest monthly gain since February.
The faint prospect that China and the United States were inching toward a resolution of their trade war also helped lift markets. China’s Commerce Ministry said Friday that Jeffrey Gerrish, the deputy U.S. trade representative, would lead a delegation to Beijing for trade talks next week.
One of the biggest concerns for investors is how much the trade dispute between China and the United States will dent global growth. The meeting next week would be the first between the two sides since U.S. President Donald Trump and President Xi Jinping called a 90-day truce in December.
China also took steps to bolster its economy on Friday. The People’s Bank of China said it would cut the amount of cash that banks have to hold as reserves against bad times, essentially freeing up about US$218-billion.
Reflecting Friday’s optimistic tone, crude oil prices rose. The American benchmark for oil prices climbed above $48 a barrel.
Shares in Europe and parts of Asia were also higher. One notable exception among global markets was Japan, where shares fell in the first trading day of the new year.
The wealth-management units of several global banks began circulating notes encouraging clients not to panic and highlighting “silver linings” and buying opportunities amid a rout that dragged markets around the world into negative territory last year.
“There are plenty of looming concerns for investors, from the U.S. government shutdown and vexed trade talks with China, to the potential impact on consumer and business confidence from the recent market volatility,” analysts at the Swiss bank UBS wrote in a note.
“However,” the note continued, “we think markets can rebound and hold an overweight to global stocks.”
In Europe, London’s FTSE 100 was up more than 2.2 per cent by the afternoon. The CAC 40 in France gained 2.71.7 per cent, and the Dax in Germany was about 2-per-cent higher.
In Asia, Hong Kong’s Hang Seng Index rose 2.2 per cent on Friday. In China, the Shanghai Composite Index gained 2.1 per cent. The Shenzhen Composite Index closed 2.7-per-cent higher.
South Korea’s Kospi index gained 0.8 per cent. Japan’s Nikkei 225 fell 2.3 per cent. Taiwan’s Taiex index fell 1.2 per cent.