Global Markets: Stocks gain as investors eye stimulus clues at Jackson Hole

Stocks and bond yields rose on Wednesday as investors made riskier bets amid optimism about US-China trade and expectations of ample central bank stimulus before a key speech by the US Federal Reserve chairman at Jackson Hole.

The broad Euro STOXX 600 shrugged off early losses to gain 0.4 per cent by late morning, with indexes in Frankfurt and Paris up 0.5 per cent and 0.2 per cent, respectively, though London’s FTSE 100 was down 0.2 per cent.

The MSCI world equity index, which tracks shares in 49 countries, gained 0.1 per cent. Wall Street futures gauges were flat.

Traders also sold bonds, with the yield on US 10-year debt rising as high as 0.7190 per cent, close to a two-month peak, as markets begin to price in a return to inflation and growth for major economies.

A day earlier, investors had dumped benchmark US debt and bought stocks after a productive call between top Beijing and Washington officials stoked hopes of smoother trade relations between the world’s two biggest economies.

Euro zone bonds calmed, with safe-haven Bund yields rising a smidgeon after enduring on Tuesday their biggest daily losses since May as better German economic data and trade dented hunger for government debt.

For many investors, bets on looser policy - the major driver of a powerful recovery for U.S. stocks from pandemic-driven lows in March - were at the forefront.

Fed Chairman Jerome Powell is due to speak at a virtual Jackson Hole symposium on Thursday, where investors think he could outline a more accommodative approach to inflation which would open the door to easier policy for a long time to come.

"Jackson Hole is a big one," said Jeremy Gatto, an investment manager at Unigestion in Geneva. "Investors are expecting a bit more clarity on what the Fed is looking at. We are likely to see a high level of accommodation for some time to come."

MORE POSITIVE

In another sign of a more positive mood, safe-haven gold faced collateral damage from rising bond yields, falling 0.5 per cent as it headed for a fourth straight day of losses.

"Higher yields also tend to act as a headwind against the gold price," said John Hardy, head of FX strategy at Saxo Bank, in a note to clients.
 

The dollar edged up slightly, after taking a knock a day earlier on data that showed U.S. consumer confidence falling to the lowest in more than six years because of worries over the impact of the coronavirus pandemic on jobs.
 

Against a basket of currencies the dollar added 0.1 per cent to 93.118, with prospects for the greenback seen as limited should Powell send a dovish message at Jackson Hole.
 

Data due later in the day is forecast to show growth in US durable goods orders slowed in July, potentially offering further bad news for the dollar.
 

The Japanese yen fell 0.2%, with MUFG analysts arguing that uncertainty over the health of Shinzo Abe, the long-serving premier, was adding to downward pressure along with advances for stocks and rising US yields.
 

In commodity markets, a positive mood on trade and U.S. producers shutting most of their offshore output in the Gulf of Mexico ahead of Hurricane Laura kept Brent crude oil mostly steady.
 

Producers evacuated 310 offshore facilities and shut 1.56 million barrels per day of crude output, 84 per cent of Gulf of Mexico’s offshore production - near the 90 per cent outage that Hurricane Katrina brought 15 years ago.

Brent futures lost 7 cents, or 0.2 per cent, to $45.78 a barrel by late morning, shedding earlier gains, with the benchmark having settled at a five-month high a day earlier.