US stocks, dollar pullback as Fed stays dovish

New York, United States: Wall Street stocks dipped and the dollar fell Wednesday as the Federal Reserve signaled a continuation of accommodative monetary policies ahead of a congressional address by President Joe Biden expected to call for massive additional investment and tax hikes.

All three major US stock indices retreated as Fed Chair Jerome Powell stressed the central bank will keep benchmark lending rate near zero while continuing its massive bond-buying program until employment recovers.

Earlier, European markets followed Asian indices slightly higher as investors reacted to some strong earnings updates, notably from banks.

Powell also took a dovish stance on inflation, saying he still expects price increases to be temporary and not the sort of longstanding problem that will require a change in policy.

"An episode of one-time price increases as the economy reopens is not the same thing as, and is not likely to lead to, persistently higher year-over-year inflation," Powell said in response to a question from AFP.

Analysts said the remarks were largely in line with expectations. Stocks have been choppy in recent days as investors debate how much upside remains following a string of records earlier in 2021.

But Powell's stance pressured the dollar, which fell against the euro and other major currencies.

Investors "were hoping that recent improvements would encourage Fed Chairman Powell to hint about tapering, but he didn't take the bait," said BK Asset Management's Kathy Lien.

"The greenback sold off across the board and with 7 weeks until the next policy meeting, the Fed's reluctance to reduce accommodation could keep the dollar from rallying in the year term," she said.

Elsewhere, bourses in Frankfurt, London, and Paris all closed higher following gains by large banks.

Deutsche Bank had an especially strong session, surging 10.7 percent after reporting its best quarterly profits for seven years after it avoided being dragged into the collapse of US hedge fund Archegos that has inflicted deep pain on rivals.

Oil prices moved higher, meanwhile, a day after OPEC and its oil-producing allies, including Russia, said they would stick to an agreement for progressive production increases over three months from May.

Investors are looking ahead to Biden's appearance later Wednesday, his first before Congress since becoming president.

Biden is set to call for a reversal of predecessor Donald Trump's tax cuts for the wealthy to pay for a huge program aimed at middle-class families, senior administration officials said.

Biden will use his speech to a joint session of Congress to unveil the $1.8-trillion American Families Plan, funded by ending Trump's tax cuts and closing loopholes used by the wealthy to escape paying their share, they added.

Key figures around 2130 GMT 

New York - Dow: DOWN 0.5 percent at 33,820.38 (close)

New York - S&P 500: DOWN 0.1 percent at 4,183.18 (close)

New York - Nasdaq: DOWN 0.3 percent at 14,051.03 (close)

London - FTSE 100: UP 0.3 percent at 6,963.67 (close)

Frankfurt - DAX 30: UP 0.3 percent at 15,292.18 (close)

Paris - CAC 40: UP 0.5 percent at 6,306.98 (close)

EURO STOXX 50: UP 0.1 percent at 4,015.03 (close)

Tokyo - Nikkei 225: UP 0.2 percent at 29,053.97 (close)

Hong Kong - Hang Seng Index: UP 0.5 percent at 29,071.34 (close)

Shanghai - Composite: UP 0.4 percent at 3,457.07 (close)

Euro/dollar: UP at $1.2124 from $1.2091 at 2100 GMT

Pound/dollar: UP at $1.3935 from $1.3913

Euro/pound: UP at 86.9 pence from 86.90 pence

Dollar/yen: DOWN at 108.58 yen from 108.70 yen

West Texas Intermediate: UP 1.5 percent at $63.86 per barrel

Brent North Sea crude: UP 1.3 percent at $67.27 per barrel

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