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U.S. Stocks Rise to Records Following Powell's Comments

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07/10/2019 | 10:20am EDT

By Nathan Allen and Asjylyn Loder

-- U.S., European equities rise

-- Asian stocks mostly advance

-- The U.S. dollar slips

U.S. and European stocks climbed Wednesday after Federal Reserve Chairman Jerome Powell said the economic outlook had not improved, suggesting an interest-rate cut could be in the cards at the central bank's next meeting.

The Dow Jones Industrial Average rose 0.5% shortly after markets opened, while the S&P 500 rose 0.5% and the Nasdaq Composite Index rose 0.7%. The yield on 10-year U.S. Treasurys recently fell to 2.045% from 2.058% on Tuesday. Yields and prices move in opposite directions.

The WSJ Dollar Index, which measures the dollar against a basket of its peers, fell 0.3%.

Europe's pan-continental Stoxx Europe 600 rose 0.2% in afternoon trade. Banking stocks were among the region's best performers, with Germany's Deutsche Bank rallying 1.9% to recover some of its losses. Shares in the German lender dropped earlier in the week as investors reacted with skepticism to Chief Executive Christian Sewing's radical restructuring program.

Data showed the British economy returned to growth in May, reversing a two-month slowdown and easing fears of a contraction in the second quarter. A 24% rise in car production drove the uptick, as auto makers restarted factories they had idled in anticipation of Brexit, which was originally scheduled to take place in April.

However, analysts cautioned that the broader economic picture in the U.K. remains subdued, despite the improvement in manufacturing.

"Recent PMIs indicate that the service sector -- which makes up the lion's share of the U.K. economy -- has struggled to regain momentum amid mounting Brexit uncertainty," said James Smith, ING developed-markets economist, adding that he expects business investment to resume its downward trend over the summer.

Global stock markets rallied in June amid hopes for an interest-rate cut, but strong jobs data from the U.S. had recently reduced the case for such an intervention, adding to uncertainty around the Fed's policy direction.

Peter Dixon, senior economist at Commerzbank, said there are fairly good reasons for a rate cut in July or September, but warned that the central bank risks running out of firepower if it acts too soon.

"If the Fed front-loads easing now while the economy is still robust and leaves less in its locker for when things really do start to slow down, that could very much be a problem for the U.S.," he said.

Aside from the Fed's policy outlook, Mr. Dixon said investors will be eager to see how Mr. Powell responds to a grilling from lawmakers over concerns that his independence is being undermined by pressure from President Trump, who has criticized him for allowing the dollar to become too strong.

Minutes from the central bank's recent policy meeting are due for release later Wednesday, which could provide additional detail on how officials viewed the economic environment.

Asian markets mostly closed higher, although Shanghai-listed stocks slipped after Chinese consumer inflation held steady in June. The consumer-price index rose 2.7% on year, in line with expectations, as slowing nonfood prices offset faster gains in food prices.

The Mexican peso continued to trade lower against the dollar on Wednesday after Mexico's finance minister, Carlos Urzúa, resigned on Tuesday, citing disagreements with left-wing President Andrés Manuel López Obrador's economic policy.

In commodities, global oil benchmark Brent crude rose 2.7% to $65.89 a barrel after data from U.S. industry group American Petroleum Institute on Tuesday showed a sharp drop in oil stocks. Gold rose 0.7%.

Write to Asjylyn Loder at asjylyn.loder@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
COMMERZBANK AG 1.81% 5.019 Delayed Quote.-13.21%
CRB COMMODITY INDEX 0.10% 195.01 End-of-day quote.0.00%
DEUTSCHE BANK AG 1.94% 6.471 Delayed Quote.-7.12%
DJ INDUSTRIAL 0.19% 26252.24 Delayed Quote.12.54%
EURO / BRITISH POUND (EUR/GBP) 0.05% 0.90509 Delayed Quote.1.67%
EURO / US DOLLAR (EUR/USD) -0.12% 1.1069 Delayed Quote.-3.28%
LONDON BRENT OIL -0.17% 59.96 Delayed Quote.10.34%
NASDAQ 100 -0.33% 7707.427106 Delayed Quote.21.08%
NASDAQ COMP. -0.36% 7991.388419 Delayed Quote.19.79%
S&P 500 -0.05% 2922.95 Delayed Quote.16.66%
STOXX EUROPE 600 -0.40% 374.29 Delayed Quote.9.97%
STOXX EUROPE 600 NR -0.38% 804.29 Delayed Quote.12.72%
US DOLLAR INDEX -0.13% 98.17 End-of-day quote.1.54%
WTI -0.23% 55.35 Delayed Quote.23.24%
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