The U.S. dollar hovered below a one-week high on Thursday and European stock markets opened flat as investors braced for three days of potentially market-moving news from the Federal Reserve’s annual symposium in Jackson Hole.
Central bankers from around the world will attend the event, which begins later in the day, with the key focus on Fed Chair Jerome Powell’s speech on Friday as traders try to gauge the chances of a September rate cut.
The pan-European STOXX 600 index (.STOXX), opens new tab and Germany’s DAX (.GDAXI), opens new tab were little changed at the open. Britain’s FTSE 100 (.FTSE), opens new tab rose 0.1%, while France’s CAC 40 (.FCHI), opens new tab fell 0.1%.
“I remain an equity bull, and a buyer of dips, viewing this recent swoon as more of an example of some froth being taken off the top of the market,” said Michael Brown, senior research strategist at Pepperstone.
“Strong earnings growth, a resilient underlying economy, and calmer tone on trade, should all keep the path of least resistance higher, while any potential Fed easing would probably provide a helping hand as well.”
Underlying momentum for equities, which have been on a tear of late, remained strong with Australia’s benchmark (.AXJO), opens new tab rallying 0.9% to hit a record. Other indexes in Asia lost some ground but haven’t strayed too far from recent highs.
Japan’s Nikkei (.N225), opens new tab, which hit an all-time intraday peak on Tuesday, drooped 0.6%. South Korea’s KOSPI (.KS11), opens new tab bounced 0.7%. It dipped to a six-week low on Wednesday, but is not too far off from a four-year high marked on July 31.
Nasdaq futures pointed slightly higher, following a 0.7% slide for the Nasdaq Composite (.IXIC), opens new tab overnight. S&P 500 futures were flat after the cash index (.SPX), opens new tab slipped 0.2%.
Fed Chair Powell has said he is reluctant to cut rates because of expected tariff-driven price pressures this summer.
Traders ramped up bets for a September cut following a surprisingly weak payrolls report at the start of this month, and were further encouraged after consumer price data showed limited upward pressure from tariffs.
However, a hotter-than-expected producer price reading last week complicated the policy picture.
Minutes out overnight from the Fed’s July gathering, when policymakers voted to keep rates steady, suggested that Fed Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller were alone in pushing for a rate cut.
That led traders to pare back odds to 80% for a quarter-point Fed rate cut on September 17, down from 84% 24 hours earlier. They are currently pricing in a total of 53 basis points of easing over the rest of the year.
President Donald Trump again exerted pressure on the central bank overnight and that pressure is set to remain a key focus for traders.
His push for more control over the Fed unnerved investors earlier in the year, sending the dollar tumbling.
After continuing his attacks on Powell earlier in the week for refraining from cutting rates this year, Trump on Wednesday targeted Fed Governor Lisa Cook, demanding she resign amid allegations of wrongdoing connected to mortgages on properties she owns in Georgia and Michigan.
Cook said she had “no intention of being bullied to step down”.
“Trump’s push to confirm Stephen Miran could add another vote for cuts in September, and if he was to successfully remove Cook, the Fed Board could end up with four members out of seven supporting his lower rates call,” said Rodrigo Catril, a strategist at National Australia Bank.
Trump nominated Council of Economic Advisers Chair Miran as a Fed governor earlier this month, following the surprise resignation of Adriana Kugler.
The main topic of the Jackson Hole conference will be labour markets, which is a relief to some traders who worried that policymakers would put a spotlight on inflation or the sensitive issue of central bank independence, said Toshinobu Chiba, a fund manager at Simplex Asset Management.
“A lot of active managers, including me, believed there was a chance central bankers could show a hawkish stance at this meeting,” said Tokyo-based Chiba. “But when I think about this theme, the possibility of that scenario has decreased.” “The U.S. labour market has weakened recently, as we have seen in the employment results this month, so like Powell has mentioned, the possibility for a rate cut is open,” he added.
The currency market has largely taken the latest developments in stride. The dollar index was steady at 98.33 on Thursday, after grinding to its highest since August 12 at 98.441 a day earlier.
U.S. two-year Treasury yields , which tend to be sensitive to monetary policy expectations, rose 1.2 basis points to 3.756% on Thursday, while 10-year yields rose 0.8 basis points to 4.304%.
Japanese government bond yields edged higher, with the 20-year yield advancing to 2.655% for the first time since late 1999 and the 10-year yield rising to its highest since October 2008 at 1.610%. Investors are wary of increased fiscal spending amid pressure for the Japanese prime minister to step down.
The dollar advanced 0.2% to 147.58 yen .
The euro and sterling were flat at $1.1641 and $1.3446, respectively.
Gold eased 0.3% to around $3,338 per ounce.
Oil prices rose as larger-than-expected declines in crude oil and fuel inventories in the U.S. supported expectations for steady demand.
Brent crude futures were up 0.9% to $67.47 a barrel, after gaining 1.6% in the previous session. U.S. West Texas Intermediate (WTI) crude futures rose 1.1% to $63.37, after climbing 1.4% on Wednesday.
Source: Reuters (Reporting by Kevin Buckland; additional reporting by Rocky Swift. Editing by Edwina Gibbs and Sharon Singleton)
