US stocks rise with all eyes on Jackson Hole peak

U.S. stocks rose Thursday as investors braced for developments at the Jackson Hole central bankers’ summit.

The S&P 500 index rose for the second straight day, gaining 1.4%, while the tech-heavy Nasdaq Composite gained 1.7%. The increases, coupled with strong gains in Asian markets, helped the FTSE All-World Index rise 1.2%. The European Stoxx 600 rose 0.3% more modestly.

The decisions came on the first day of the annual conference in Jackson Hole, Wyoming, where central bankers including the chairman of the US Federal Reserve Jay Powellgathered to discuss the challenges ahead for the global economy.

The event, hosted by the Kansas City arm of the fedis being watched closely by investors looking for signals about the future direction and pace of monetary policy.

Kansas City Fed President Esther George told CNBC on Thursday that the United States still has “a high level.” . . generalized inflation”, but it was “too early” to say whether the central bank would raise interest rates by 0.75 percentage points for the third consecutive meeting in September.

Market prices indicate that investors expect the Fed to raise borrowing costs to 3.7% by February 2023, from 3.3% expected in early August. The central bank’s target range is between 2.25% and 2.50%.

In Jackson Hole, Powell “would recognize the weakening of the growth cycle and. . . narrowing the path to a soft landing,” said Joseph Little, global chief strategist at HSBC Asset Management. The focus on controlling inflation ‘means the market is right to rule out an early pivot from the Fed and steer short-term interest rate expectations towards a walk-and-see approach’ .

But others anticipated a softer approach. “We think the Fed’s tone is starting to change,” said Thomas Costerg, senior US economist at Pictet Wealth Management. “Powell will likely remain vague on next steps, but we still expect him to indicate that the bias is for a lower pace of rate hikes.”

European bond markets recouped losses ahead of central bankers’ speeches on monetary policy, with Bank of England Governor Andrew Bailey and European Central Bank board member Isabel Schnabel also due to speak at Jackson Hole.

The yield on UK two-year debt, which is sensitive to changes in short-term interest rate expectations, fell 0.12 percentage points to 2.78% and the yield on German two-year debt lost 0.06 percentage points to 0.75%. Bond yields fall when prices rise.

This came after short-term instruments sold off on Wednesday as investors worried about more aggressive BoE and ECB interest rate hikes to curb inflation.

The yield on the benchmark 10-year US Treasury slipped 0.08% to trade at 3.03%.

The recent bond volatility comes at a time when European bond market liquidity is lower due to the summer holidays and heightened economic uncertainty.

Earlier on Thursday, Asian stock markets made gains, with Hong Kong’s Hang Seng closing up 3.6% and mainland China’s CSI 300 gauge up 0.8% after China announced a Recovery plan.

The Chinese State Council, its cabinet, Wednesday announced the addition of Rmb300 billion ($44 billion) in credit support by its political banks, the state-controlled institutions used by Beijing to spur economic growth.

In the currency markets, the dollar index, which tracks the US currency against a basket of six peers, slipped 0.2%. The euro briefly broke above parity with the greenback before falling back to $0.998, up 0.1% for the day.

Leave a Comment