The Japan Times - Wall Street rallies, dollar drops as Fed chief fuels rate cut hopes

Investors had been eagerly waiting for Powell's speech all week, hoping for hints that the Fed would cut rates at its next meeting in September to spur economic growth.

New York's three main indexes surged following his remarks, rebounding after a tech sell-off this week.

European stock markets also got a bump in afternoon deals, though the gains were limited by the impact of President Donald Trump's tariffs on the German economy, which shrank in the second quarter.

In his speech at the annual symposium of global central bankers in Jackson Hole, Wyoming, Powell warned that risks of higher inflation and a weakening jobs market meant a "challenging situation".

"Downside risks to employment are rising," Powell said, adding that the effects of Trump's tariffs on consumer prices "are now clearly visible".

"With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance," he said.

Powell has come under intense public pressure this year from Trump to lower rates -- an unusual political intervention at the independent central bank.

The Fed has kept benchmark interest rates steady at a range of between 4.25 percent and 4.50 percent since its last reduction in December.

In keeping rates unchanged, policymakers cited resilience in the labour market as they monitored the effects of Trump's wide-ranging tariffs on the world's biggest economy.

"The market was pricing in roughly a 75 percent chance of a rate cut in September. Those odds should see a notable increase after Chair Powell's Jackson Hole comments," said Bret Kenwell, an investment analyst at eToro.

He noted however that "rising inflation is still a risk and may prevent the Fed from moving as quickly as they'd like, but the committee is unlikely to stand by idly if we see further weakness in the jobs market."

The dollar fell against main currencies -- by around one percent against the euro, pound and yen -- as lower returns make the greenback less appealing to foreign investors.

Oil prices were little changed after rising more than one percent on Thursday, as investors weighed the potential for a peace deal in Ukraine more than three years after Russia's invasion.

Observers have been speculating over how a possible lifting of sanctions on Russia, a major oil producer, would impact markets of the possible lifting of sanctions on Russia, a major producer.

Trump on Thursday set a two-week timeframe for assessing peace talks between Moscow and Kyiv, following days of high-stakes diplomacy that saw him meet with Russian and Ukrainian counterparts in person, as well as several European leaders.

Russian Foreign Minister Sergei Lavrov, however, told NBC television Friday there was "no meeting planned" between the Russian and Ukrainian presidents.

In corporate news, Deutsche Post shares fell 1.1 percent after the German postal service said it would restrict package deliveries to the United States due to Trump's tariffs.

France's La Poste, owned by the French state, announced similar restrictions.

- Key figures at around 1540 GMT -

New York - Dow: UP 2.0 percent at 45,699.17 points

New York - S&P 500: UP 1.6 percent at 6,474.86

New York - Nasdaq: UP 2.0 percent at 21,522.29

London - FTSE 100: UP 0.1 percent at 9,321.40 (close)

Paris - CAC 40: UP 0.4 percent at 7,969.69 (close)

Frankfurt - DAX: UP 0.3 percent at 24,363.09 (close)

Tokyo - Nikkei 225: UP 0.1 percent at 42,633.29 (close)

Hong Kong - Hang Seng Index: UP 0.9 percent at 25,339.14 (close)

Shanghai - Composite: UP 1.5 percent at 3,825.76 (close)

Euro/dollar: UP at $1.1720 from $1.1604 on Thursday

Pound/dollar: UP at $1.3535 from $1.3412

Dollar/yen: UP at 146.70 yen from 148.37 yen

Euro/pound: UP at 86.59 pence from 86.52 pence

West Texas Intermediate: FLAT at $63.55 per barrel

Brent North Sea Crude: DOWN 0.1 percent at $67.62 per barrel

K.Nakajima--JT