European stocks waver with US central bank’s minutes in focus

BLOOMBERG

European stocks fluctuated after their slump as investors awaited further clues on the path of interest rates from the US Federal Reserve. The pound strengthened as UK inflation topped expectations.
Europe’s Stoxx 600 benchmark rose 0.2% after declining as much as 0.4% earlier. US futures pointed to gains at the open. Government bonds in the US and Europe traded broadly stronger, halting a run of losses that was fuelled by concern interest rates will be kept at high levels for longer than expected.
China’s economic woes continued to weigh on markets, with the onshore yuan sinking toward its weakest in 16 years against the dollar and the MSCI China Index of stocks set to erase gains seen since a key policy meeting in late July. “There is currently hardly any catalyst, which in turn gives the weak economic forecasts more room to have an impact,” said Frank Sohlleder, an analyst for ActivTrades.
Money-market wagers for the Bank of England’s peak interest rate held steady at 6% after the UK inflation data. The numbers added to hot wage figures and US retail statistics that rattled markets, spurring bets tight central bank policy will be in place for longer as Minneapolis Fed President Neel Kashkari warned that inflation was “still too high.”
US 10-year Treasuries led gains among government bonds on Wednesday on speculation the jump in yields is overdone. The current yield provides a good entry point for investors, according to Steven Major, global head of fixed-income research at HSBC Holdings Plc. “Going up the US curve to 10 year-plus is now looking more and more interesting,” he said on Bloomberg Television.
Beijing’s economic weakness remained front and center after the People’s Bank of China moved to step up support for the yuan and inject cash into the financial system.  A report on Wednesday showed new-home prices in China fell for a second month in July, while JPMorgan Chase & Co cut its full-year growth forecast and Macquarie Group lowered estimates for the yuan.
“Market participants are watching the developments on the real estate markets in China and the US with growing concern,” said Andreas Lipkow, a strategist at Comdirect Bank.
Elsewhere, oil and gold prices edged higher. Benchmark European natural gas futures rose as much as 10% — after gaining 13% on August 15 — as traders weighed the prospect of disruptions against weak demand and high storage levels in the region.