ASX in positive territory as Wall Street brushes off Fed speech

The local bourse observed a minute’s silence at 11am AEST for Queen Elizabeth II after the monarch’s death in Scotland overnight.

On Thursday, the ASX jumped by 1.8 per cent as Reserve Bank governor Philip Lowe signalled interest rate rises would be smaller in coming months.

On Wall Street overnight, the S&P 500 closed 0.7 per cent higher, after recovering from a 0.9 per cent slide in the early going. The Dow Jones Industrial Average and the Nasdaq composite each gained 0.6 per cent after making it through their own bumpy ride. The indexes are on pace for a weekly gain after posting losses for the previous three weeks.

Wall Street had its eye on interest rates, as the European Central Bank made its largest-ever rate increase to fight inflation. The move is in line with steps taken by the US Federal Reserve and other central banks.

Investors also heard from Fed Chair Jerome Powell, who reaffirmed the central bank’s commitment to keep rates high as long as necessary to get inflation under control.

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On the same day the European Central Bank delivered its big rate increase, Powell told a conference on monetary policy hosted by the Cato Institute, a think tank that promotes libertarian ideas, that the Fed would keep rates high “until the job is done” in getting inflation back down to its 2 per cent goal.

“There is a record of failed attempts to get inflation under control, which only raises the ultimate costs to society,” Powell said.

The Fed has already raised rates four times this year and markets expect it to deliver another jumbo-sized increase of three-quarters of a percentage point at its next meeting in two weeks.