Federal Reserve Chair Jerome Powell said that additional interest-rate increases will be needed to cool inflation and borrowing costs may need to peak higher than previously expected, if the strong jobs market persists.

“We think we are going to need to do further rate increases,” Powell said Tuesday in a question-and-answer session with David Rubenstein at the Economic Club of Washington. “The labor market is extraordinarily strong.”

If the job situation remains very hot, “it may well be the case that we have to do more,” he said.

Stocks and Treasuries initially rallied as Powell spoke, after he stopped short of taking a more hawkish stance on interest rates in the wake of the robust jobs data.

Asked if he would have raised rates by 50 basis points last week, instead of the 25 basis points as officials did, he demurred. (Bloomberg - Continue Reading)

European equities are the flavor of the month. But it won’t take much for investor sentiment to sour again.

With a 10% surge in January, euro-area stocks are beating the US to enjoy their best ever start to a year. But top investors including BlackRock Inc. and Amundi SA warn that markets are being too sanguine about risks ahead. 

A lot can derail this rally. Earnings downgrades are gathering pace, while the European Central Bank is holding on to its hawkish stance in the face of recession as inflation - though easing - remains elevated. And there’s no resolution in sight to the war in Ukraine that began nearly a year ago.

“It’s dangerous to think just because stocks are going up that things are okay,” said Kasper Elmgreen, head of equities at Amundi. “We’ve now got a very high conviction that 2022’s resilience will break. The market has not yet appreciated the magnitude of earnings downgrades ahead.” (Bloomberg - Continue Reading)