Stocks gain as traders assess interest rates, China support

BLOOMBERG

Stocks started the week on a positive note, tracking gains on Wall Street following cautious comments from central bankers at Jackson Hole. China’s support measures for its equities market helped lift sentiment.
The rate-sensitive technology sector led the advance in Europe after Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde at Jackson Hole  failed to shake the outlook for interest rates. With UK markets closed for a bank holiday, trading volumes were two-thirds lower than the 30-day average for this time of day. US equity futures edged higher, while Treasuries and the dollar were steady. Among individual premarket movers, 3M Co gained more than 5% after agreeing to pay more than $5.5 billion to resolve lawsuits related to military earplugs.
Powell stuck to the script in his Jackson Hole speech, saying that the Fed is “prepared to raise rates further if appropriate,” even as he stressed that the central bank would “proceed carefully,” guided by economic data.  Lagarde, likewise, said the ECB would set borrowing costs as high as needed to keep inflation in check but stopped short of signaling an increase at the next meeting.
“Not much was said that changed our outlook for US equities,” RBC Capital Markets strategist Lori Calvasina wrote in a note.
“Equity investors have already been wrapping their heads around the idea that rates may be higher for longer, that it’s possible the Fed’s job may not be done just yet, and that they are data dependent.” Asian benchmarks rose after Beijing reduced the levy charged on stock trades, among other measures.
Chinese stocks pared most of their early gains, however, showing once again that efforts to boost its markets are falling flat in the face of economic worries.
Foreign funds accelerated their selling through the day, poised to take this month’s outflows to the biggest on record. “The China authorities are clearly stepping up efforts to rebuild confidence in Beijing’s policy commitment to achieve growth and support the market,” said Xiaojia Zhi, chief China economist at Credit Agricole.
“But then a fundamental growth improvement as well as tangible policy action onshore is needed to really turn the mood around, and therefore more time could be needed.”