Global stocks soar on dovish Fed, strong US jobs data

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Federal Reserve Chairman Jerome Powell signaled the central bank could pause interest-rate increases if the USA economy weakened and pledged he will stay at his post even if President Donald Trump presses him to resign.

Jerome Powell said that the central bank was "listening sensitively" to stock markets after the sell-off last month and would be "patient" with its interest rate policy.

Trump picked Powell to head the Fed in February. That announcement rallied the Dow Jones Industrial Average up 746 points before the closing bell.

Powell said "no" when asked if he would resign from his role if asked.

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The recent market turbulence has posed a dilemma for the Fed, as a seeming loss of confidence in financial markets about the USA economy's prospects was offset by upbeat data from the real economy, including a strong December jobs report.

Earlier, stock markets were buoyed by news that China and the United States will hold trade talks in Beijing on Monday and Tuesday. Since then, the Federal Reserve chairman has received several reasons to temper his assessment.

A report Friday from JPMorgan Chase said trends in financial markets suggest investors have priced in around a 60 percent chance of a recession, while economists have put the odds of a recession within one year at around 40 percent.

That news, coupled with a strong jobs report, sent stocks rocketing up.

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In mid-December, the Federal Open Market Committee voted to raise interest rates for the fourth and final time in 2018, even as President Trump urged them to "feel the markets". Powell made the comments while speaking on a panel in Atlanta that included former Fed chiefs Janet Yellen and Ben Bernanke. The stock market has seen stomach-churning declines since October, a development that Trump has blamed on the Fed's continued rate hikes, although the president's trade dispute with China as well as concerns about global economic growth also played a part in the market volatility.

Still, with unemployment at 3.7 percent, some economists caution that inflation could move higher if labor shortages begin to bite - that's partly why the Fed hiked rate four times previous year.

The Fed's tightening cycle includes both rate hikes and the gradual shedding of its more than $4 trillion in assets. That flexibility, he added, applied as well to the monthly reductions to the Fed's balance sheet.

"(Powell is) saying the right things: "that the Fed is prepared to shift, that it's listening carefully, that it's sensitive to the messages the market is sending", said James Athey, Senior Investment Manager, Aberdeen Standard Investments, in London.

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Trump has been vocal about his dissatisfaction with Powell, noting on Christmas Eve on Twitter, "The only problem our economy has is the Fed..."