Stocks gain as investors eye stimulus clues at Jackson
Hole
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[August 26, 2020] By
Tom Wilson
LONDON (Reuters) - Stocks and bond yields
rose on Wednesday as investors made riskier bets amid optimism about
U.S.-China trade and expectations of ample central bank stimulus before
a key speech by the U.S. Federal Reserve chairman at Jackson Hole.
The broad Euro STOXX 600 shrugged off early losses to gain 0.4% by late
morning, with indexes in Frankfurt and Paris up 0.5% and 0.2%
respectively, though London's FTSE 100 was down 0.2%.
The MSCI world equity index, which tracks shares in 49 countries, gained
0.1%. Wall Street futures gauges were flat.
Traders also sold bonds, with the yield on U.S. 10-year debt rising as
high as 0.7190%, 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 U.S. debt [.US] 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% 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.
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A pedestrian in front of the London Stock Exchange offices in the
City of London, Britain, December 29, 2017. REUTERS/Toby Melville
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% 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 U.S. 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 U.S. 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% of Gulf of Mexico's offshore production - near the 90%
outage that Hurricane Katrina brought 15 years ago.
Brent futures lost 7 cents, or 0.2%, to $45.78 a barrel by late morning,
shedding earlier gains, with the benchmark having settled at a five-month high a
day earlier.
For Reuters Live Markets blog on European and UK stock markets, please click on:
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Graphic: 2020 asset performance
http://fingfx.thomsonreuters.com/
gfx/rngs/COMMODITIES-ASSETS/010031B62XZ/
index.html#section/assets
Graphic: World FX rates in 2020
http://fingfx.thomsonreuters.com/
gfx/rngs/GLOBAL-CURRENCIES-PERFORMANCE/
0100301V041/index.html
(Reporting by Tom Wilson; Editing by Toby Chopra and David Holmes)
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