Closing summary
The Federal Reserve, the US central bank, is gearing up to restart interest rate cuts, its chair Jerome Powell signalled in a closely-watched speech.
Powell has come under intense political pressure from Donald Trump in recent months and has defied the US president’s calls to resign, calling the independence of the Fed into question.
He warned that the US economy was facing a “challenging situation” and said Trump’s tariffs and immigration crackdown were knocking the global economy and the US labour market.
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Stock markets rallied on the suggestion of future rate cuts, while the yields on US government bonds fell, and the dollar moved lower.
In the UK, the government is to cover pay and unpaid pension contributions for workers at the UK’s third-largest steelworks, in South Yorkshire, which collapsed on Thursday.
Liberty Steel’s main British business, Speciality Steel UK (SSUK), was put into administration yesterday after a high court judge ruled that it was insolvent and that its owner, the metals tycoon Sanjeev Gupta, had no prospects of repaying debts of several hundred million pounds.
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A row between UK health secretary Wes Streeting and pharmaceutical companies has intensified after drugmakers rejected the government’s latest offer on NHS drug pricing.
The two sides failed to reach agreement by a midday deadline on Friday, meaning the mechanism under which the health service claws back some of the money it pays for medicines will continue at a rate the industry said was “unsustainable” and could ultimately disadvantage patients.
The industry body, the Association of the British Pharmaceutical Industry (ABPI), said the stalemate could mean companies launch fewer medicines in the UK, which could ultimately disadvantage patients.
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Many thanks for reading the blog this week. Wishing you all a pleasant weekend, and an enjoyable August bank holiday to readers in England and Wales – JP
There’s been some marked market reaction to US Fed chair Jerome Powell’s closely-watched Jackson Hole speech.
US stock markets rallied in response to Powell’s speech, where he pointed to a possible rate cut at the central bank’s September meeting but also said the US economy was facing a “challenging situation”.
Powell’s speeches have often moved markets in the past and this, expected to be his last as Fed chair, was no exception.
Share markets rallied in response, while yields on US government bonds and the dollar fell.
The S&P 500 rose by about 1.6% following Powell’s remarks, while the Nasdaq Composite climbed by almost 2%. The Dow Jones Industrial Average rose 2% to a record intraday high.
The suggestion of rate cuts to come was welcomed, with yields falling on US Treasuries.
The rate-sensitive two-year Treasury yield fell nearly 10 basis points to 3.69% immediately after the speech, while the benchmark 10-year yields fell 6 basis points to 4.27%.
The US dollar also weakened against a basket of currencies, including the euro and the Japanese yen.
Chris Beauchamp, chief market analyst at trading platform IG, said:
Stocks have surged in the wake of [Powell’s] speech, with the S&P 500 clawing back almost all the losses this week and indices in both the US and Europe firmly in positive territory. Worries about higher inflation have been cast aside for now, as investors look forward to the US economy powering ahead in the autumn.”
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