China Stimulus Lifts Mood in Countdown to Powell: Markets Wrap

(Bloomberg) — Stocks rose on Thursday as massive stimulus from China and better-than-expected economic data from Germany stabilized some nerves in the anxious wait for an important speech from Federal Reserve Chairman Jerome Powell. The Treasury Yield and Dollar Gauge dipped.

Energy stocks and the construction and materials sectors were the biggest gainers in Europe, with retailers the only industry group in the red. US futures edged higher on positive closes for the S&P 500 and Nasdaq 100. Hong Kong shares rose after the storm delayed the start of trading there.

Sentiment got a boost after China provided stimulus with further measures of 1 trillion yuan ($146 billion). Germany’s economy proved more resilient in the second quarter than initially thought, although deteriorating business confidence still pointed to a cloudy day. Traders expect the market to remain volatile given Powell’s comments Friday at the Jackson Hole meeting for clues on the pace of US monetary tightening.

Mehwish Ayoob, senior investment strategist at State Street Global Advisors, said on Bloomberg television, “The market is really trying to justify a bear market rally and is looking for that weak pivot from the Fed and it’s not likely to get ” “We have to continue to expect this volatility, not beyond Jackson Hole, ahead of any narrative from Fed officials.”

Crude oil added to a rally that could feed into renewed panic over whether price pressure has peaked. Natural gas prices have hit new highs, intensifying an energy crisis that threatens the euro-area economy and therefore the global outlook.

Fed officials for Jackson Hole have made it clear they see more monetary tightening ahead, a message that erased the boom in stocks and bonds since mid-June. The tension in the markets is whether these assets will continue to return to year’s lows.

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What to watch this week:

  • US GDP, early jobless claims, Thursday

  • The Kansas City Fed hosted its annual economic policy symposium on Thursday in Jackson Hole, Wyoming

  • ECB’s July Minutes, Thursday

  • Fed Chair Powell speaks in Jackson Hole on Friday

  • US Personal Income, PCE Deflator, University of Michigan Consumer Sentiment, Friday

Some of the main moves in the markets:

shares

  • Stockx Europe 600 up 0.7% as of 9:33 am London time

  • Futures on the S&P 500 rose 0.9%

  • Futures up 1% on Nasdaq 100

  • Futures on the Dow Jones Industrial Average rose 0.7%

  • MSCI Asia Pacific Index up 1.6%

  • MSCI Emerging Markets Index up 1.7%

currencies

  • Bloomberg Dollar Spot Index fell 0.4%

  • The euro rose 0.4% to $1,0004

  • The Japanese yen rose 0.4% to 136.52 per dollar

  • The offshore yuan rose 0.3% to 6.8570 per dollar

  • The British Pound rose 0.4% to $1.1852

bond

  • Yield on 10-year Treasury fell one basis point to 3.09%

  • Germany’s 10-year yield fell three basis points to 1.34%

  • UK 10-year yield down six basis points to 2.64%

Goods

  • Brent crude rose 0.2% to $101.46 a barrel

  • Spot gold rose 0.8% to $1,764.61 an ounce

More stories like this are available at bloomberg.com

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