World stocks steady, dollar ticks up on Powell-watch
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[August 26, 2022] By
Carolyn Cohn and Stella Qiu
LONDON/SYDNEY (Reuters) - World stocks were
flat on Friday and the dollar edged up as traders and investors awaited
a speech from Federal Reserve Chair Jerome Powell for clues on the
gradient of the U.S. central bank's rate-hike path.
Investors have pared back expectations that the Fed could pivot to a
slower pace of rate hikes, as U.S. inflation remains at 8.5% on an
annual basis, well above the central bank's 2% target. But Powell's
speech at 1400 GMT at the Fed's annual conference at Jackson Hole will
be scrutinised for any indication that an economic slowdown might alter
its strategy.
Interest rate futures now imply a 60% chance of a 75 basis point (bps)
Fed hike in September.
"The Fed and other central banks have been falling asleep at the wheel
over inflation, now they are desperate to regain crediblity," said Luca
Paolini, chief strategist at Pictet Asset Management.
"Economists are clearly calling for the Fed not to blink, and if
anything accelerate the pace of tightening."
MSCI's world equity index was little changed and was heading for a
modest 0.5% drop on the week.
U.S. S&P futures fell 0.25%, European stocks edged up 0.16% and
Britain's FTSE 100 rose 0.58%.
![](http://archives.lincolndailynews.com/2022/Aug/26/images/ads/current/sunag_daily_sda_FAIR_2022.png)
German consumer sentiment is set to hit a record low for the third month
in a row in September as households brace for surging energy bills, a
survey showed, while French consumer confidence unexpectedly rose in
August.
Overnight on Wall Street, stocks rose while Treasury yields slipped, as
investors digested comments from Fed officials who continued hammering
the point that they will drive rates up and keep them there until
inflation has been squeezed from the economy.
"So it is a fair bet that the Powell speech will take a similar turn
today," said Robert Carnell, regional head of Research, Asia-Pacific, at
ING.
"If so, the most likely market reaction would be a rise in yields at
both the front and back of the yield curve, a sell-off in equities and
dollar strength, as markets seem to have been positioning themselves for
a more supportive set of comments."
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![](../images/082622PIX/busine49.jpg)
U.S. Federal Reserve Board Chair Jerome
Powell speaks during his re-nominations hearing of the Senate
Banking, Housing and Urban Affairs Committee on Capitol Hill, in
Washington, U.S., January 11, 2022. Brendan Smialowski/Pool via
REUTERS
![](http://archives.lincolndailynews.com/2022/Aug/26/images/ads/current/graue_22SILVERADO_061822.png)
The dollar firmed by a slight 0.1% against a basket of major currencies, close
to recent 20-year highs.
The euro was little changed at $0.9968 after hitting a 20-year low of $0.9899
earlier this week, with Fed rate hike expectations supporting the U.S. currency.
The dollar rose 0.4% to 137.04 yen.
Sterling fell 0.44% against the dollar after Britain's energy regulator said
energy bills will rise 80% from October.
The yield on benchmark U.S. 10-year Treasury notes rose 5 bps to 3.0762%, while
the two-year yield touched 3.3925%, up by 2 bps. German 10-year bond yields rose
3 bps to 1.351%.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5% to one-week
highs.
Resources-heavy Australia shares gained 0.8% while Japan's Nikkei advanced 0.6%.
A surge in Chinese tech shares listed in Hong Kong, buoyed by hopes for an audit
deal between the United States and China, ran out of steam though the index was
up 0.55%, while Chinese shares, gripped by domestic economic worries and Fed
rate hikes, dipped 0.2%.
The Wall Street Journal reported on Thursday that Washington and Beijing are
nearing an agreement that allows American accounting regulators to travel to
Hong Kong to inspect audit records of U.S.-listed Chinese companies.
Oil rose on signs of improving fuel demand, although further gains were capped
as the market awaited Powell's speech. [O/R]
Brent crude rose 1.4% to $100.69 per barrel and U.S. crude was also up by 1.4%
to $100.61 a barrel.
Spot gold was traded at $1752 per ounce, down 0.36%. [GOL/]
(Editing by Sam Holmes and Kim Coghill)
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