Global stocks mixed as Powell flags 'fairly highly valued' markets; Fed rate path in focus

Global shares traded mixed Wednesday after Wall Street’s rally paused, as Federal Reserve Chair Jerome Powell cautioned that stock prices are, in his words, “fairly highly valued.” The tepid turnaround followed a stretch of gains that had pushed major indices to fresh highs, even as investors remained ambivalent about how far markets can run without stronger inflation signals. Europe’s major benchmarks edged lower in early trading, while U.S. stock futures offered only tentative direction. France’s CAC 40 slipped nearly 0.2% to 7,857.54, and Germany’s DAX dipped about 0.3% to 23,589.16. Britain’s FTSE 100 fell around 0.2% to 9,209.94. In Asia, Japan’s Nikkei 225 recouped morning losses to finish 0.3% higher at 45,630.31, while Australia’s S&P/ASX 200 slipped 0.9% to 8,764.50. South Korea’s Kospi dropped 0.4% to 3,472.14. Hong Kong’s Hang Seng rose 1.4% to 26,518.65, and the Shanghai Composite gained 0.8% to 3,853.64. U.S. stocks paused after a three-day rally that had lifted the indexes to all-time highs in each of the last three sessions.

Powell’s remarks underscored the Fed’s tricky balancing act: inflation has stubbornly remained above its 2% goal while the job market has shown resilience. He said the central bank is in an unusual position, grappling with rising concerns about employment at the same time that inflation has refused to cool. The comments were his first public remarks since the Fed cut its main interest rate last week for the first time this year. Analysts said Powell’s stance reinforced that there is no risk-free path for the Fed as it calibrates policy in an environment of evolving labor-market strength and persistent inflation. "Essentially the Fed Chairman confirmed what we already knew, which is that the central bank remains somewhat ‘between a rock and a hard place’ when it comes to managing the risks of rising inflation and falling employment," said Tim Waterer, chief market analyst at KCM Trade.

Investors have priced in further rate moves by the Fed, though officials have signaled more cuts could come through the end of this year and into next. The guidance remains cautious, as policymakers weigh the risk that lower borrowing costs could rekindle inflation pressures even as the economy shows signs of cooling. Market participants will be watching for additional signals from officials about the pace and magnitude of any future reductions, as well as how quickly inflation trends might move toward the Fed’s 2% target.

An important data point on the horizon is the release Friday of the inflation update the Fed watches most closely: the personal consumption expenditures price index, the central bank’s preferred gauge. Economists expect last month’s reading to show a slight acceleration, a factor that could influence the central bank’s expectations for upcoming policy moves and tamp down any exuberance in equity markets.

On the energy front, benchmark U.S. crude slipped 12 cents to $63.29 a barrel, while Brent crude, the international standard, fell 9 cents to $67.54. In currency markets, the U.S. dollar strengthened to 148.15 Japanese yen from 147.56 yen. The euro traded at $1.1777, down from $1.1818.

Overall, traders remain cautiously optimistic but focused on the evolving path of monetary policy and inflation. While markets have shown resilience in the face of rate cuts and a strong economy, the prospect of inflation re-accelerating or shifting unexpectedly continues to color risk sentiment. As policymakers weigh further easing against price stability, investors will likely navigate the mixed terrain of global growth signals, central-bank rhetoric, and competing market narratives.