China stimulus lifts mood in countdown to Fed’s Powell

Bloomberg

US futures rise on Thursday as China’s massive stimulus steadied some nerves in the anxious wait for a key speech by Federal Reserve Chair Jerome Powell. Treasury yields and a dollar gauge dipped.
Contracts on the S&P 500 and Nasdaq 100 pushed higher in the wake of positive closes for both gauges, though they came off session highs. Sentiment was boosted after China stepped up stimulus with a further 1 trillion yuan ($146 billion) of measures. 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.
Economists were relatively downbeat on the measures, while financial markets were muted. The yield on 10-year government bonds rise 2 basis points to 2.65%. China’s CSI 300 Index of stocks rise as much as 0.6% before paring gains to trade up 0.3% as of 2:28 pm local time.
Europe’s stock benchmark erased gains amid mixed economic data from the region’s biggest economy. Energy and healthcare stocks were the biggest gainers, with retailers underperforming. Germany’s economy proved more resilient than initially thought in the second quarter, though worsening business confidence pointed to a still-cloudy outlook.
Crude oil held around $95 a barrel, with elevated energy prices feeding 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.
“Powell is likely to push back on premature expectations of a dovish pivot, reiterating the focus on the fight against high inflation,” said Silvia Dall’Angelo, a senior economist at Federated Hermes Ltd. “Whether markets take him seriously amid an increasingly gloomy outlook for the global economy is yet to be seen.”
Futures on the S&P 500 rose 0.5% as of 5:53 am New York time and futures on the Nasdaq 100 also climb 0.6%.
While futures on the Dow Jones Industrial Average rose 0.3%, the Stoxx Europe 600 was little changed. The MSCI World index rose 0.3%.
The Bloomberg Dollar Spot Index fell 0.4% and the euro rose 0.3% to $1.0000. While the British pound rose 0.4% to $1.1844, the Japanese yen rose 0.5% to 136.40 per dollar.
The yield on 10-year Treasuries declined three basis points to 3.08% and Germany’s 10-year yield declined four basis points to 1.33%. Britain’s 10-year yield declined seven basis points to 2.63%.
West Texas Intermediate crude was little changed and gold futures rose 0.9% to $1,778.10 an ounce.