(News Bulletin 247) – The CAC 40 gained 0.70% this Friday and 1.71% over the week as a whole. Fed Chairman Jerome Powell said in Jackson Hole that the time had come to adjust monetary policy, i.e. to lower key rates.

Investors were eagerly awaiting Jerome Powell’s speech in Jackson Hole this Friday. The chairman of the US Federal Reserve (Fed) did not disappoint and the markets appreciated it.

The CAC 40 ended up 0.70% at 7,577.04 points. On a weekly basis, the Paris index gained 1.71%, continuing its stock market rally that began last week.

During his speech in Jackson Hole, Jerome Powell very clearly adopted an accommodating tone. The central banker explained that the “time” had come for monetary policy “to adjust” (meaning: lower rates).

“We will do everything in our power to support a strong labor market as we continue to move toward price stability,” he also said.

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Bond rates and the dollar fall

“The main reason for this increased clarity (in the speech, editor’s note) is the current situation of the American employment market, which President Powell described as an ‘inevitable cooling’,” notes Florent Ielpo of Lombard IM.

“Fed Chairman Jerome Powell’s dovish tone in Jackson Hole today and his promise to do ‘all we can to support a strong labor market’ imply that a 50 basis point cut could be on the table at the September meeting,” Capital Economics points out.

“Jerome Powell’s speech at the Jackson Hole conference not only confirms that the Fed’s first rate cut will take place in September, it also announces a significant change of direction for the Fed by marking the shift from a focus on inflation to a focus on the labor market,” explains Bastien Drut, head of strategy and economic studies at CPR AM.

Following the Fed Chairman’s statement, US bond rates fell. The yield on the 10-year US bond stood at 3.806%, compared to 3.854% before his intervention.

The dollar, meanwhile, is in free fall. The euro jumped 0.7% against the greenback to $1.1195, returning to levels it has not seen for over a year.

In terms of values, 36 out of 40 CAC 40 shares finished in the green, with the biggest increase being recorded by Accor (+2.9%).

Oil, for its part, is making significant progress following Jerome Powell’s speech. The October contract on North Sea Brent is up 1.9% to $78.70 per barrel, while the same-term contract on WTI listed in New York is up 2.2% to $74.60 per barrel. Gold, for its part, is up 1.4% to $2,552.25 per ounce.