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Markets mixed as Powell says no call made yet on size of March rate rise

FTSE Federal Reserve Chair Jerome H. Powell testifies before a U.S. Senate Banking, Housing, and Urban Affairs Committee hearing on
FTSE: Federal Reserve chair Jerome Powell has warned of a return to big rate rises. Photo: Kevin Lamarque/Reuters

The FTSE 100 and European stocks were mixed this Wednesday as Federal Reserve chair Jerome Powell said no call made yet on size of March rate rise.

The FTSE 100 (^FTSE) rose 0.18% to close at 7,933 points, while the CAC 40 (^FCHI) in Paris lost 0.13% to 7,329. In Germany, the DAX (^GDAXI) climbed 0.54% to 15,643.

Across the pond, US stocks struggled for direction during the trading session, following two labour prints that showed the labour market remains tight amid sticky inflation.

Wall Street heard from Federal Reserve Chair Jerome Powell before the House Financial Services Committee Wednesday morning.

"We have not made any decision about the March meeting, we are not going to do that until we see the additional data" that will come between now and the March 21-22 Federal Open Market Committee meeting, Powell told a House panel as part of testimony on the economy and monetary policy.

"We are not on a pre-set path” and upcoming data will help determine whether a 25 basis point or 50 basis point rate rise will be needed at the officials' next gathering, Powell said.

The Dow Jones (^DJI) lost 0.24% to 32,778 points. The S&P 500 (^GSPC) rose 0.17% to 3,993 points and the tech-heavy NASDAQ (^IXIC) gained 0.42% to 11,579.

Powell spoke before the Senate Banking, Housing and Urban Affairs Committee on Tuesday and cautioned lawmakers that the central bank’s terminal rate will likely be higher than previously anticipated because of stubbornly high economic data in recent weeks.

Russ Mould, investment director at AJ Bell, said: "Hawkish comments yesterday from Federal Reserve chairman Jay Powell made it perfectly clear that US interest rates would keep going up, potentially faster and harder than markets had previously priced in.

“The reaction was understandable – markets pulled back, the dollar jump54ed, and investors took a moment to digest the new landscape.“In the grand scheme of things, a 1.5% pullback in the S&P 500 index was not disastrous. Interestingly, pre-market indicative prices show the main US indices moving higher on Wednesday, implying that we are not going to see another period of chaos."

Read more: UK businesses freeze hiring plans amid recession fears

Ipek Ozkardeskaya at Swissquote Bank said: “Investors got a double shot of hawkishness from Federal Reserve (Fed) Chair Jerome Powell’s semi-annual testimony before the US Senate yesterday.”

“This time, Powell left no place for doubt. He clearly said that nothing about the data suggests to him that they have tightened too much, and that ‘if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes’.”

The testimony continues today but moves from the Senate Banking Committee to the House Financial Services Committee.

Back in London, the blue-chip FTSE was being dragged down by a fall in Admiral (ADM.L) after the motor insurer slashed its full-year dividend.

Admiral Group lost over 4% and hit a four-month low after cutting its full-year dividend and as its full-year profit missed the consensus due to increased claim costs amid higher prices of car repairs.

Legal & General (LGEN.L) boosted its operating profit by 12% last year in its first results since Nigel Wilson announced he is stepping down after more than a decade leading the financial services giant.

However, shares weren't moving with the same optimism as they slipped 1.17%.

Richard Hunter, head of markets at Interactive Investors said: "The impending retirement of the CEO has also dampened some of the enthusiasm for company prospects. During his tenure, there has been a total shareholder return in excess of 600% and, while the replacement process and handover are likely to take around a year, there is always the risk of the loss of some momentum."

Read more: Bitcoin slides after Fed signals preparation to 'increase the pace of rate hikes'

Meanwhile, Brent crude (BZ=F) lost ground and was trading at around $82/barrel.

In Asia, Tokyo’s Nikkei 225 (^N225) advanced 0.48% to 28,444 points, while the Hang Seng (^HSI) in Hong Kong slumped 2.35% to 20,051. The Shanghai Composite (000001.SS) finished flat at 3,283 points.

Watch: Powell sinks stocks: Top moments from Senate testimony

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