The FTSE 100 and stocks on Wall Street slipped as the Federal Reserve chair pledged to resolutely fight rapid price increases, arguing the bigger mistake would be allowing price increases to become entrenched.
On Wall Street, the Dow Jones (^DJI) lost 048% to 33,133 after Jerome Powell's speech, while the S&P 500 (^GSPC) lost 0.64% to 4,172 points and the tech-heavy Nasdaq (^IXIC) retreated 0.75% to 12,543.
The UK's blue-chip index extended gains, boosted by commodities and banking sectors, while shares of software firm Micro Focus (MCRO.L) soared more than 90% to lift the midcap index after a $6bn (£5.09bn) buyout deal.
Anglo American (AAL.L) climbed 1.84% after major copper producing country Peru abandoned a plan to hike taxes on the mining industry.
Pharmaceutical GSK (GSK.L) gained 1.24%, after Citigroup said it was on "a positive catalyst watch" following the Zantac legal developments that could materially reduce its exposure, compared to the $17bn that is discounted. GSK's recently spun-off consumer health unit Haleon (HLN.L) jumped 1.25%.
New York stocks fell on Friday after much-anticipated remarks from Powell, the chairman of the Federal Reserve, sounded hawkish on the outlook for rate rises from the central bank.
“Restoring price stability will take some time and requires using our tools forcefully,” he told the annual gathering of central bankers at Jackson Hole, Wyoming.
The remarks came at one of the most hotly-anticipated events by traders, who are on watch for insight into the balance of thinking among policymakers on the room they have to fight inflation without holding back the world’s biggest economy too much.
“There will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” said Powell.
A recent run of strong economic data in the US, especially from the labour market, has looked to give the more aggressive voices on the rate-setting Federal Open Market Committee greater sway.
It has already adopted bigger-than-usual rate hikes of 0.75% and taken its target range for the Fed Funds rate to 2.25% to 2.50%, with rises of 2.25% in total this year.
Meanwhile, Brent crude (BZ=F) was still hovering around the $100 a barrel mark, dropping 0.49% to $98.
In Asia, Tokyo’s Nikkei 225 (^N225) climbed 0.57% to finish at 28,641 while the Hang Seng (^HSI) in Hong Kong gained 0.75% to 20,118. The Shanghai Composite (000001.SS) finished in the red, slipping 0.31% to close at 3,236 points.