US stocks edged higher on Thursday, as investors braced themselves for a deluge of headlines from the Jackson Hole central bankers’ summit.
The S&P 500 index rose 0.2 per cent at the opening bell, while the technology-heavy Nasdaq Composite added 0.6 per cent. The Stoxx 600 regional traded flat in Europe.
These moves were made on the first day at the Jackson Hole annual conference in Wyoming. This is where central bankers, including Jay Powell, the US Federal Reserve chair, have gathered to discuss the challenges facing the global economy.
Investors are closely watching the Kansas City Fed arm for signs on the future direction or pace of monetary policies.
Kansas City Fed President Esther George told CNBC on Thursday that the US still had “high . . . broad-based inflation” but that it was “too soon” to say if the bank would raise interest rates by 0.75 percentage points for the third consecutive meeting in September.
According to market pricing, investors expect the US central bank will raise borrowing costs to 3.7% by February 2023. This is an increase from the 3.3% expected at the beginning of August. The Fed’s current target range stands at 2.25 per cent to 2.50 per cent.
Powell was probably at Jackson Hole 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 fell 0.12 percentage points, to 2.81 %. Italian two-year debt yields fell 0.17 percentage points, to trade at 1.75 %. Prices rise and bond yields drop.
This was after short-dated instruments were sold off on Wednesday. Investors became concerned about the Bank of England raising interest rates aggressively to curb inflation.
The benchmark 10-year US Treasury note yield was flat at 3.10 percent.
Due to economic uncertainty and summer holidays, the recent bond volatility is occurring at a time when European fixed-income markets have less liquidity.
Earlier on Thursday, Asian equity markets made gains, with Hong Kong’s Hang Seng closing up 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.
The dollar fell 0.1% against six currencies in currency markets. The euro briefly rose above parity against the greenback, before falling back to $0.996, which was broadly flat for the day.
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