Federal Reserve Chairman Jerome Powell opened the door for a rate cut soon (NICHOLAS KAMM)

New York (AFP) – Wall Street stocks advanced and the dollar fell after the Federal Reserve signaled it could soon cut interest rates due to uncertainty over the economic outlook.

The gains in the United States were modest after Tuesday’s heady sessions, which saw US and European markets rally on optimism over US-China trade talks and dovish commentary from European Central Bank chief Mario Draghi.

As expected, the Fed kept interest rates unchanged, but Fed chief Jerome Powell said  many central bankers feel the case for an interest rate cut has “strengthened,” noting that trade frictions with China have dimmed the growth outlook.

In its statement, the Fed said it “will act as appropriate to sustain the expansion” and dropped prior wording that it would be “patient” in assessing economic data, an omission that boosted expectations in futures markets that the Fed will cut interest rates in July.

The more dovish statement followed up on a shift in tone from Powell on June 4. Over the ensuing period, the Dow  has gained more than six percent.

Art Hogan, chief market strategist at National Securities, said the Fed’s more dovish tilt was in line with expectations and largely priced in by financial markets.

The next big event will be the G20 meeting, which will provide a forum for US President Donald Trump and Chinese leader Xi Jinping to try to hash out a trade deal.

“Where we are now is back to focusing on trade and putting monetary policy on the backburner,” Hogan told AFP.

The more dovish Fed tone weighed on the dollar, which had been boosted in the prior session by Draghi’s statement that the ECB could cut interest rates if the economy slows much more.

Near 2100 GMT, the euro was still positive against the dollar, but not as much as it had been shortly after the Fed announcement.

That partial retreat reflects that even with the Fed’s shift, “the market will be left with a US central bank that may not be as dovish as rivals in Europe and elsewhere, a dollar-positive notion,” said Joseph Manimbo, senior market analyst at Western Union Business Solutions.

In other markets, the Bovespa index jumped 0.9 percent to post its first-ever close above 100,000 points at 100,303.

After rising on Tuesday, oil prices ended a volatile session modestly lower after the Organization of the Petroleum Exporting Countries set its next meeting for early July in Vienna.

– Key figures around 2050 GMT –

New York – Dow: UP 0.2 percent at 26,504.00 (close)

New York – S&P 500: UP 0.3 percent at 2,926.46 (close)

New York – Nasdaq: UP 0.4 percent at 7,987.32 (close)

London – FTSE 100: DOWN 0.5 percent at 7,403.54 (close)  

Frankfurt – DAX 30: DOWN 0.2 percent at 12,308.53 (close)

Paris – CAC 40: UP 0.2 percent at 5,518.45 (close)

EURO STOXX 50: UP 0.1 percent at 3,454.70 (close)

Tokyo – Nikkei 225: UP 1.7 percent at 21,333.87 (close)

Hong Kong – Hang Seng: UP 2.6 percent at 28,202.14 (close)

Shanghai – Composite: UP 1.0 percent at 2,917.80 (close)

Euro/dollar: UP at $1.1231 from $1.1194 at 2100 GMT

Pound/dollar: UP at $1.2646 from $1.2558

Dollar/yen: DOWN at 108.08 yen from 108.45 yen

Brent North Sea: DOWN 32 cents $61.82 per barrel

Oil – West Texas Intermediate: DOWN 14 cents at $53.76 per barrel

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Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.