Markets rally as Powell signals September rate cut at Jackson Hole

US equities surged on Friday after Fed Chair Jerome Powell hinted at the possibility of a September rate cut during his Jackson Hole address, fuelling the strongest rally since April 2025. The S&P 500 advanced 1.50%, the Nasdaq gained 1.90%, and the Dow Jones jumped 846 points to a record intraday high. Powell highlighted a “shifting balance of risks” that could justify a policy adjustment, while warning that inflationary pressures persist. Following his comments, markets priced in a roughly 91% probability of a 25 bps cut next month.

The South African rand also firmed on Friday, lifted by a softer US dollar and a rebound in gold prices after Powell’s remarks. The currency had traded sideways for most of the week, even after South Africa posted its highest consumer inflation reading in 10 months on Wednesday. Analysts noted that Powell’s Jackson Hole speech was the key driver for the rand’s move. At 17h55, it was trading at R17.45/$, down about 1.42% from Thursday’s close and at its strongest level since November 2024.

In Europe, stocks were mixed as investors awaited Powell’s comments and assessed the implications of the EU’s new trade pact with the US. The FTSE 100 bucked the trend, climbing to 9 321 for a fresh record close, supported by Powell’s signal that lower rates could aid the labour market despite ongoing inflation concerns from tariffs.

Asian markets closed higher, led by China. The Shanghai Composite jumped 1.45% to 3,826, a new 10-year high, while the Shenzhen Component rose 2.07% to 12 166. Gains were driven by strong fund flows, retail buying, and easing US-China trade tensions, alongside Beijing’s measures to curb excessive competition. However, growth data remain weak and policy support modest. In Japan, the Nikkei 225 inched up 0.05% to 42 633, while the Topix gained 0.58% to 3 101, breaking a three-day losing streak after new inflation figures. Core CPI rose 3.10% in July, down slightly from June but above expectations, keeping pressure on the Bank of Japan to consider a rate hike later this year.

Gold edged higher to $3 375/oz, trading in a tight band after testing record highs of $3 500 in April. Prices remain supported by safe-haven demand and expectations of a dovish Fed shift, with Powell noting that weaker labour market data and rising unemployment may warrant a policy adjustment—likely translating into a 25 bps cut in September.