European stocks were mixed on Friday as markets continued to try and make sense of the historic shift on inflation announced by US Federal Reserve chair Jerome Powell.
On Thursday, Powell said that the central bank would launch a new monetary policy framework that will likely see interest rates in the US remain low for longer.
The Federal Reserve will now tolerate inflation “moderately” above its 2% target, Powell said, noting that persistently low inflation in the US over the last eight years has caused a series of economic problems.
“Markets haven’t got over-excited by the US Federal Reserve’s new stance on letting inflation run higher, despite it implying that interest rates will stay lower for longer – normally something that would benefit equities,” said Russ Mould, the investment director of AJ Bell.
“One could argue that the Fed following this path was already expected by the market, hence why stocks haven’t surged ahead.”
The declines in Europe followed a broadly positive session in Asia.
Japan’s Nikkei (^N225) fell by 1.4% after the country’s long-serving prime minister, Shinzo Abe, said he would resign due to ill health.
Futures were also pointing to a positive open for stocks in the US on Friday as traders continued to digest stubbornly high unemployment data and Federal Reserve chair Jerome Powell’s pledge to try and nudge inflation higher.
Futures on the Nasdaq (NQ=F), which snapped its five-day winning streak on Thursday, fell marginally.
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