European markets rebound following Powell speech

A more positive atmosphere prevails across global markets this morning, as Fed chair Powell calms nerves about the direction of monetary policy.

• Powell speech eases investor fears about tightening.

• Stock markets edge up in cautious trading.

• RELX earnings a symbol of the stalling value rebound.

Stock markets are recovering some recent losses this morning, after Jerome Powell laid to rest any fears about an overeager Fed moving to tighten policy prematurely. In a week mostly devoid of any heavyweight data on the economic front, the progress towards fiscal stimulus has been the key driver, but the presence of a speech by the FOMC chairman held back risk appetite yesterday. Fortunately for the bulls, Powell was keen to stress that there was no rush to change policy, and that ‘substantial further progress’ would need to be made on the Fed’s dual mandate. At present, the employment element of that mandate is much more important, and with inflation still low the Fed has continued to signal that its foot remains firmly on the accelerator. Nonetheless, investors are still jittery, worrying that the recent highs for some indices will not hold, so we can expect more volatility around current levels even as the overall push higher continues.

RELX has seen its shares rally along with most of the market since the end of October, but the caution in today’s update justifies the lack of progress in the share price in recent weeks. New virus variants spell further trouble and have pushed back expectations of a return to normal, resulting in a cooling off of the rebound in stocks like Relx that have recovered in recent months. Earnings season has seen tech names prosper once more, as investors head back to growth stocks after a recent bloom for value names.

Ahead of the open, we expect the Dow to start at 31,479, up 42 points from Wednesday’s close.