Fed Chairman Powell says economic challenges remain

Spot gold was down 0.1 per cent at $1,213.41 per ounce at 1230GMT. — AFP  File

By Christopher Condon, Rich Miller and Jeanna SmialekFederal Reserve Chairman Jerome Powell said interest rates are "just below" the so-called neutral range, softening previous comments that seemed to suggest a greater distance and spurring speculation central bankers are increasingly open to pausing their series of hikes next year.

But the report highlighted stock prices that are high by some measures, commercial real estate values "growing faster than rents" and the willingness of lenders to fund risky corporate loans.

USA new home sales stood at a seasonally adjusted annual rate of 544,000 in October, 8.9 percent below the revised September level, the Commerce Department said on Wednesday.

And Powell said the Fed's gradual increases balanced the risks between raising too much and not enough.

The dollar index against a basket of six major currencies was effectively flat at 96.805 following an overnight loss of 0.6 percent.

Earlier, hopes for a US-China truce on trade had also helped lift equities.

The two-day G20 meeting also begins in Argentina.

The market surged after the remarks with the Dow soaring more than 600 points, its biggest one-day gains since March 26 as investors cheered the seemingly more dovish comments.

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Powell said in remarks at a Fed award ceremony that these challenges remain even though unemployment is near five-decade low and the financial system has been bolstered since the 2008 financial crisis. There was a bright spot, Preliminary Industrial Production rose 2.9% versus a 1.3% forecast.

Spot gold was down 0.1 per cent at $1,213.41 per ounce at 1230GMT, having dipped to its lowest level since Nov 15 at $1,211.36 in the previous session.

Sterling, meanwhile, gained 0.6 percent after the Bank of England warned about the economic risks from Britain exiting the European Union without a deal. -China tensions could trigger a knee-jerk rally but say the move would likely be short lived unless there are substantive compromise from both sides - most notably if Xi can persuade Trump to postpone a sharp tariff hike on Chinese goods due to take effect January 1.

"Our job is not to hope for the best but to prepare for the worst", BoE Governor Mark Carney said. Today's 2:00 PM EST FOMC Minutes release appears to have market participants hesitant to take on any new risk.

"I think he's assuaging fears, saying that they'r willing to do anything they need to do, '" said Michael Skordeles, US macro strategist at SunTrust Advisory Services in Atlanta, regarding the bank's response to Brexit. And we've got the Fed's grand 2018 finale the following week.

The yield on 10-year Treasuries was little changed at 3.06 percent.

Bond prices fell. The yield on the 10-year Treasury note rose to 3.06 percent. The Dow closed the month with a 1.7 percent increase, the S&P 500 advanced 1.8 percent, and the Nasdaq eked out a 0.3 percent rise.

Powell said the Fed is paying "very close" attention to economic data even as it expects continued "solid" growth, low unemployment and inflation near its 2-percent target.

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