Europe stocks rally wanes on trade woes, earnings jitters

Federal Reserve chairman signals cut in US interest rates

Powell's hints towards an impending interest rate hike were based on his belief that trade tensions between the US and China and lingering weakness in the global economic outlook warrant such measures. That allayed investors' concerns that unexpectedly strong data reported Friday might give the Fed reason to hold interest rates.

Trump has criticized Powell and his colleagues on a regular basis for nearly a full year - first calling on the Fed to stop, and then to reverse, its 2018 interest-rate increases.

While Powell did not specifically state that a Fed rate cut could be coming at the July meeting, investors have taken his two days of testimony as strong evidence that is what will occur.

Shares in Europe were uneven with Germany's DAX losing 0.1% to 12,360 and Britain's FTSE 100 flat at 7,529.

The Dow shot above 27,000 points to set a new intraday record, while the S&P 500 briefly broke the 3,000 point level.

US stocks edged higher and the dollar fell as hopes rose for an imminent interest-rate cut, while oil futures were little changed as supply worries triggered by a tropical storm were offset by signs of a global surplus for several months.

In his opening comments, Powell says that "uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook".

Asked about the impact of illegal immigration, the Fed chief said, "people who come in legally or illegally, they add to our workforce and they contribute to GDP", while research shows little to no impact on wages.

A study conducted by LPL Financial Research revealed that steep rate cuts generally occur around recessions. As it stands, money markets are calling for 65bps worth of easing by the end of the year, while for the July meeting there is a near 10% chance of a 50bps cut.

The Dow powered above 27,000 points for the first time while the dollar slumped on Thursday as investors welcomed the head of the Federal Reserve effectively flagging a cut in U.S. interest rates later this month.

Data on Thursday showed annual inflation in the euro zone's biggest economy accelerated in June, but remained below the ECB's target.

The US Labor Department said on Thursday that its consumer price index (CPI) excluding the volatile food and energy components rose 0.3% in June. The Nasdaq Composite reached an all-time high, gaining 1% quickly on Wednesday morning. -China trade tensions, with S&P 500 companies expected to report a 0.4% dip in second-quarter earnings, according to Refinitiv IBES data.

MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.2 percent, after 3 sessions of losses.

US equities tested key thresholds, overcoming an earlier setback triggered by a tweet from Donald Trump, as technology shares pushed higher on the eve of earnings. Brent crude futures settled down 49 cents, or 0.73%, at $66.52 a barrel. The market focus remains on the dollar and the Fed with the greenback being beaten down to start the day once again, much like yesterday.



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