LONDON – The S&P 500 index hit a record high on Wednesday after comments from the US Federal Reserve fueled hopes the central bank would stick to its accommodative monetary policy despite a sharp jump in inflation last month.

Fed Chair Jerome Powell, in comments prepared for delivery at a congressional hearing later in the day, reassured investors that the US job market “is still a ways off” from the progress the central bank wants to see before reducing its support for the economy, and current high inflation will ease soon.

Data on Wednesday showed US producer prices increased more than expected in June, a day after a reading showed US consumer prices rose by the most in 13 years last month. 

Nine of the 11 major S&P 500 sectors were trading higher, with energy and technology leading early gains.

At 9:51 am ET, the Dow Jones Industrial Average was up 127.43 points, or 0.37 percent, at 35,016.22, the S&P 500 was up 18.37 points, or 0.42 percent, at 4,387.58 and the Nasdaq Composite was up 69.93 points, or 0.48 percent, at 14,747.58.

Meanwhile, MSCI’s broadest gauge of global stocks dipped 0.14 percent after hitting a record high on Tuesday on investor bets of a global economic recovery just weak enough to permit central banks to retain a dovish policy.

European stocks fell 0.31 percent after reaching record peaks on Tuesday, with Germany down 0.15 percent and France off 0.26 percent.

Britain’s FTSE 100 dropped 0.54 percent, after UK inflation touched 2.5 percent in June, its highest in nearly three years.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.25 percent as Chinese blue-chips fell 1.15 percent. Japan’s Nikkei dipped 0.38 percent.

Kiwi flight

The New Zealand dollar shot up 0.92 percent as markets bet that a New Zealand rate hike is imminent after the central bank on Wednesday unexpectedly announced it would end its bond purchase programme from next week.

Barclays analysts forecast a 25 basis point rate hike at the central bank’s November meeting.

The Bank of Canada is also expected to taper weekly asset purchases at its meeting later on Wednesday, according to a Reuters poll.

The Canadian dollar dipped 0.12 percent to 1.2494 per US dollar.

The euro rose 0.19 percent to US$1.1796 after the US dollar earlier touched a three-month high against the single currency.

The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, weakened 0.2 percent to 92.615 after rising as high as 92.832 – just below the 92.844 level reached last week for the first time since April 5.

The dollar dipped 0.11 percent against the yen to 110.50.

The pound rose 0.43 percent against the dollar after the high UK inflation data.

“An interest rate rise is not yet around the corner, but it is steadily becoming a less distant prospect, and this is injecting momentum into the pound,” said Ulas Akincilar, head of trading at INFINOX.

Bank of England Deputy Governor Jon Cunliffe said a jump in British inflation was a bump on the road as the economy reopened from lockdowns, and that the BoE would look at its likely persistence in new forecasts next month.

US bond yields pulled back after jumping across the curve on Tuesday on the US inflation data.

The benchmark 10-year yield slipped to 1.3946 percent from a close of 1.415 percent on Tuesday.

US President Joe Biden’s administration is continuing to push for fiscal stimulus to boost the US economy.

Democrats on the US Senate Budget Committee late on Tuesday reached an agreement on a US$3.5 trillion infrastructure investment plan that they aim to include in a budget resolution to be debated this summer.

German 10-year Bund yields were little changed at -0.293 percent after Germany sold 3.392 billion euros in a top-up of its 0.00 percent 10-year Bund.

Oil fell after data showed China’s first-half crude imports dropped 3 percent from January to June versus a year earlier. 

US crude was down 0.57 percent at US$74.80 a barrel and global benchmark Brent crude was down 0.45 percent at US$76.05 per barrel.

Spot gold, a traditional inflation hedge, rose 0.42 percent to US$1,815 per ounce.