Oil and bitcoin are rallying while stocks are mixed as traders weigh the Fed’s more measured take on rate cuts

  • Federal Reserve Chair Jerome Powell has poured cold water on traders’ hopes for a cut to interest rates next month.
  • The stance appears “fully priced in the asset prices,” one analyst says.
  • Rising tensions between the US and Iran and the US-China trade war have driven oil higher.
  • Bitcoin has rallied 11% to over $12,500.
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The Federal Reserve’s chairman, Jerome Powell, has poured cold water on traders’ hopes for a cut to interest rates next month, a move analysts say was already priced in to equities prices as stocks were only flat or slightly down on Wednesday.

At the same time, geopolitical tensions have pushed oil prices higher, and bitcoin is up 11% at over $12,500.

“The Fed is insulated from short-term political pressures,” Powell said in a speech Tuesday, pushing back against President Donald Trump’s repeated calls for rate cuts. The central bank continues to weigh low unemployment and economic growth against “heightened uncertainties” such as the US-China trade war, weaker global economic data, and tepid inflation, he said.

While the case for lower interest rates has strengthened, he said, “monetary policy should not overreact to any individual data point or short-term swing in sentiment.”

Traders may be more preoccupied with geopolitical issues.

“At this point, the dovish Fed expectations appear to be fully priced in the asset prices,” said Ipek Ozkardeskaya, the senior market analyst at London Capital Group.

Relations between the US and Iran continue to worsen, but hopes for a resolution to the US-China trade war have grown after Bloomberg reported the US was willing to suspend an additional round of tariffs — which would target more than $300 billion worth of Chinese goods — and restart trade negotiations if Trump’s planned meeting this week with Chinese President Xi Jinping went well.

“This weekend’s Trump-Xi meeting is poised to be the market’s litmus test for risk appetite going into the rest of the year,” said Han Tan, a market analyst at FXTM.

Here’s the market roundup as of 9.35 a.m. ET:

  • US stocks opened higher with the Dow Jones Industrial Average up 0.3%, the S&P 500 up 0.4%, and the Nasdaq up 0.8%.
  • European equities have rallied with Germany’s DAX up 0.4%, the Euro Stoxx 50 up 0.2%, and Britain’s FTSE 100 up 0.1%.
  • Asian markets drifted lower, with the Shanghai Composite down 0.2% and Japan’s Nikkei down 0.5%, while the SZSE Component was flat and Hong Kong’s Hang Seng rose 0.1%.
  • Oil prices have continued to climb with West Texas Intermediate crude up 2.7% at $59.40 a barrel and Brent crude up 1.7% at $65.40.
  • Bitcoin has surged 11% to about $12,575. The cryptocurrency has risen by more than a third in the past week.

SEE ALSO: Trump’s China tariffs could slam American shoppers with an extra $800 in costs a year

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