Stocks diverge as US rally loses steam

Stock markets diverged Wednesday as a rally fueled by upbeat US economic data ran out of steam, but the dollar got a boost on rate hike comments.

The yen has come under pressure as the Bank of Japan refuses to move away from its ultra-loose monetary policy, even as the Federal Reserve hikes interest rates AFP News

Stock markets diverged Wednesday as a rally fueled by upbeat US economic data ran out of steam, but the dollar got a boost on rate hike comments.

Tokyo closed up two percent and European indices also pushed higher, one day after a closely watched gauge of US consumer confidence hit its highest level since January last year.

But after lifting US markets on Tuesday, Wall Street bourses meandered on Wednesday.

Reports that Washington could block the export of artificial intelligence chips to China weighed on sentiment.

Shares in Nvidia, whose chips are particularly prized for use in computers working on artificial intelligence, fell by 2.9 percent. Shares in Intel shed 1.7 percent.

Both trimmed their losses and the tech-heavy Nasdaq later pushed into positive territory. However, both the Dow and S&P 500 finished modestly lower.

Rate hike comments by US Federal Reserve chief Jerome Powell dampened sentiment for equities, but boosted the greenback.

Speaking at an annual conclave of central bankers in Portugal, Powell said that the Fed is leaving open the possibility of consecutive interest rate hikes in the months ahead, to cool the economy further and bring down inflation.

Powell said that US monetary policy will likely take more time to act against high inflation, and bring it down to the Fed's long-term target of two percent.

"Policy hasn't been restrictive enough for long enough," he added.

That dashed hopes that the Fed would be able to quickly begin cutting rates.

"The US dollar is the best performer, after Fed chairman Jay Powell said that more rate hikes were coming, including the possibility of rate rises at consecutive meetings if the data supported such an action," said analyst Michael Hewson at CMC Markets.

Italian Prime Minister Giorgia Meloni on Wednesday criticized the European Central Bank over its hiking of rates, warning "the cure risks proving more damaging than the disease".

Meloni was reacting to ECB President Christine Lagarde's warning Tuesday that the bank would "continue to increase rates in July" unless there was "a material change to the outlook".

The ECB has lifted borrowing costs at the fastest pace ever over the past year in a bid to cool inflation after Russia's war in Ukraine sent energy and food prices surging.

While sky-high energy prices that drove inflation up last year have come down, ECB officials are now concerned about the impact of rising wages as workers demand higher salaries to cover rising costs.

Oil prices bounced around, then jumped after data showed a massive draw of 9.6 million barrels last week from US stockpiles.

Nevertheless, prices remained not far off multi-month lows, which have been tested several times in recent weeks.

New York - Dow: DOWN 0.2 percent at 33,852.66 (close)

New York - S&P 500: DOWN less than 0.1 percent at 4,376.86 (close)

New York - Nasdaq: UP 0.3 percent at 13,591.75 (close)

London - FTSE 100: UP 0.5 percent at 7,500.49 (close)

Frankfurt - DAX: UP 0.6 percent at 15,949.00 (close)

Paris - CAC 40: UP 1.0 percent at 7,286.32 (close)

EURO STOXX 50: UP 0.9 percent at 4,344.75 (close)

Tokyo - Nikkei 225: UP 2.0 percent at 33,193.99 (close)

Hong Kong - Hang Seng Index: UP 0.1 percent at 19,172.05 (close)

Shanghai - Composite: FLAT at 3,189.38 (close)