Global equities soar with all eyes at Jackson Hole economic symposium
Global stocks soared Thursday as investors braced for a torrent of headlines from the Jackson Hole central banker’s shutdown.
Europe’s regional Stoxx 600 added 0.3 percent in afternoon trading, while futures contracts tracking Wall Street’s S&P 500-meter and the tech-heavy Nasdaq 100 contributed 0.6 and 0.8 percent, respectively.
Traders were ready for the start of the Jackson Hole, Wyoming conference on Thursday, where central bankers, including US Federal Reserve Chairman Jay Powell, will discuss the challenges facing the global economy.
Organized by the Kansas City branch of the Fed, the event is being watched closely by investors for signals about the future direction and pace of monetary policy.
Market prices indicate that investors expect the Fed to raise interest rates to 3.7 percent in February 2023, against expectations of 3.3 percent in early August. The central bank’s current target range is between 2.25 percent and 2.50 percent.
Powell would likely “recognize the weakening of the growth cycle and . . . the narrowing path to a soft landing,” said Joseph Little, global chief strategist at HSBC Asset Management. The emphasis on controlling inflation “means that the market is right to price out an early Fed pivot and shift short-term interest rate expectations towards a “hike and see” approach.
European bond markets made up for losses ahead of the central bankers’ monetary policy speeches, and Bank of England Governor Andrew Bailey and European Central Bank Governing Council Member Isabel Schnabel said: would also speak in Jackson Hole.
The yield on two-year British debt, which is sensitive to changes in interest rates expectations, fell 0.1 percentage point to 2.8 percent and the Italian two-year yield fell 0.16 percentage point to trade at 1.76 percent. Bond yields fall when prices rise.
This came after short-term instruments sold off on Wednesday, as investors worried that the Bank of England and the European Central Bank would raise interest rates more aggressively to curb inflation.
The yield on the benchmark 10-year US Treasury bill fell 0.01 percentage point to 3.10 percent.
Recent bond volatility comes at a time of weaker liquidity in European fixed income markets due to summer vacations and heightened economic uncertainty.
Earlier on Thursday, Asian stock markets posted gains, with Hong Kong’s Hang Seng adding 3.6 percent and mainland China’s CSI 300 meters 0.8 percent as China announced a stimulus package.
China’s state council, his cabinet, announced on Wednesday the addition of Rmb300 billion ($44 billion) in credit support from its policy banks, the state-controlled institutions used by Beijing to boost economic growth.
In foreign exchange markets, the dollar fell 0.2 percent against a basket of six currencies. The euro briefly rose above parity with the greenback, before sliding back to $0.997, up 0.1 percent for the day.