Global stocks ticked up on Thursday as investors braced themselves for a deluge of headlines from the Jackson Hole central bankers’ summit.
Europe’s regional Stoxx 600 added 0.3 per cent in afternoon trading, while futures contracts tracking Wall Street’s S&P 500 gauge and technology-heavy Nasdaq 100 added 0.6 and 0.8 per cent respectively.
Traders were poised for the beginning of the Jackson Hole, Wyoming conference on Thursday, where central bankers including US Federal Reserve chair Jay Powell will discuss the challenges for the global economy.
The event, hosted by the Kansas City arm of the Fed, is closely watched by investors for signals on the future direction and pace of monetary policy.
Market pricing indicates that investors are expecting the Fed to raise interest rates to 3.7 per cent by February 2023, up from expectations of 3.3 per cent at the start of August. The central bank’s current target range stands at 2.25 per cent to 2.50 per cent.
Powell was likely to “acknowledge the weakening of the growth cycle and . . . the narrowing pathway toward 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 move short-term interest rate expectations towards a “hike and see” approach.
European bond markets recouped losses ahead of central bankers’ speeches on monetary policy, with the Bank of England governor Andrew Bailey and the European Central Bank executive board member Isabel Schnabel also set to speak at Jackson Hole.
The yield on UK two-year debt, which is sensitive to changes in interest rate expectation, fell by 0.1 percentage points to 2.8 per cent and Italian two-year debt yields lost 0.16 percentage points to trade at 1.76 per cent. Bond yields fall when prices rise.
This came after the short-dated instruments sold off on Wednesday, as investors grew concerned about the Bank of England and the European Central Bank raising interest rates more aggressively to curb inflation.
The yield on the benchmark 10-year US Treasury note fell 0.01 percentage points to 3.10 per cent.
The recent bond volatility comes at a time of weaker liquidity in European fixed-income markets because of summer holidays and increased economic uncertainty.
Earlier on Thursday, Asian equity markets made gains, with Hong Kong’s Hang Seng adding 3.6 per cent and mainland China’s CSI 300 gauge rising 0.8 per cent after China announced a stimulus package.
China’s state council, its cabinet, on Wednesday announced the addition of Rmb300bn ($44bn) in credit support by its policy banks, the state-controlled institutions used by Beijing to spur economic growth.
In currency markets, the dollar slipped 0.2 per cent against a basket of six currencies. The euro briefly rose above parity with the greenback before slipping back to $0.997, up 0.1 per cent for the day.