China Stimulus Lifts Mood in Countdown to Powell: Markets Wrap

(Bloomberg) — Stocks rose Thursday as China’s massive stimulus and better-than-expected economic data from Germany steadied some nerves in the anxious wait for a key speech by Federal Reserve Chair Jerome Powell. Treasury yields and a dollar gauge dipped.

Energy stocks and the construction and materials sectors were the biggest gainers in Europe, with retailers the only industry group in the red. US futures pushed higher in the wake of positive closes for the S&P 500 and Nasdaq 100. Hong Kong shares advanced after a delayed start to trading there due to a storm.

Sentiment was boosted after China stepped up stimulus with a further 1 trillion yuan ($146 billion) of measures. Germany’s economy proved more resilient than initially thought in the second quarter, though worsening business confidence pointed to a still-cloudy outlook. Traders expect markets to remain volatile as they look to Powell’s comments due Friday at the Jackson Hole meeting for clues on the pace of US monetary tightening.

“The market is really trying to justify a bear market rally and is looking for that dovish pivot from the Fed and it’s unlikely to get that,” Mehvish Ayub, senior investment strategist at State Street Global Advisors, said on Bloomberg Television. “We have to continue to expect this volatility, not just ahead of Jackson Hole, ahead of any sort of narrative from Fed officials.”

Crude oil added to a rally that could feed into renewed jitters about whether price pressures have peaked. Natural gas prices have surged to fresh highs, intensifying an energy crisis that threatens the euro-area economy and hence the global outlook.

Fed officials in the run-up to Jackson Hole have been clear they see more monetary tightening ahead, a message that’s eroded a bounce in stocks and bonds from mid-June troughs. The tension in markets is whether those assets will continue to head back toward the lows of the year.

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What to watch this week:

• US GDP, initial jobless claims, Thursday

• Kansas City Fed hosts its annual economic policy symposium in Jackson Hole, Wyoming, Thursday

• ECB’s July minutes, Thursday

• Fed Chair Powell speaks at Jackson Hole, Friday

• US personal income, PCE deflator, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.7% as of 9:33 a.m. London time

• Futures on the S&P 500 rose 0.9%

• Futures on the Nasdaq 100 rose 1%

• Futures on the Dow Jones Industrial Average rose 0.7%

• The MSCI Asia Pacific Index rose 1.6%

• The MSCI Emerging Markets Index rose 1.7%

Currencies

• The Bloomberg Dollar Spot Index fell 0.4%

• The euro rose 0.4% to $1.0004

• The Japanese yen rose 0.4% to 136.52 per dollar

• The offshore yuan rose 0.3% to 6.8570 per dollar

• The British pound rose 0.4% to $1.1852

Bonds

• The yield on 10-year Treasuries declined one basis point to 3.09%

• Germany’s 10-year yield declined three basis points to 1.34%

• Britain’s 10-year yield declined six basis points to 2.64%

Commodities

• Brent crude rose 0.2% to $101.46 a barrel

• Spot gold rose 0.8% to $1,764.61 an ounce

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