Ian Johnston 48 MINUTES AGO
European shares and US stock futures were muted on Wednesday, ahead of a widely anticipated economic symposium in Jackson Hole this week where the Federal Reserve is expected to maintain a hawkish stance.
Europe’s regional Stoxx 600 added 0.1 per cent, while London’s FTSE 100 lost 0.3 per cent. Declines were more pronounced in Asian markets, with Hong Kong’s Hang Seng closing down 1.2 per cent and China’s mainland CSI 300 gauge shedding 1.9 per cent, as concerns grow about the indebtedness of the country’s mammoth housing market.
Futures contracts tracking Wall Street’s S&P 500 traded flat, after the broad equity gauge closed out a third consecutive day of losses on Tuesday.
Market participants were awaiting further clues about the direction of the Fed’s monetary policy, ahead of the start of the central bank’s annual gathering in Wyoming on Thursday.
“Caution is the name of the game on equity markets with expectations that aggressive policies to tame roaring inflation will continue despite fresh signs that aggressive policies to tame roaring inflation will continue despite fresh signs that aggressive policies to tame roaring inflation will continue despite fresh signs that the US economy is slowing,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
Minneapolis Fed president Neel Kashkari, previously perceived as a more dovish US central bank policymaker, said on Tuesday night that the combination of “maximum employment” and “very high inflation” made the Fed’s approach “very clear: we need to tighten monetary policy to bring things into balance”.
Gloomy survey data on Tuesday had added to questions about the health of the world’s largest economy, and how far the Fed can raise interest rates into a protracted slowdown. A purchasing managers’ index for the US services sector fell to a 27-month low of 44.1 in August, down from 47.3 in July. A reading below 50 indicates a contraction.
The euro dropped 0.4 per cent on Wednesday to $0.9924 against the dollar, while the greenback added 0.3 per cent against a basket of six other currencies. According to pricing in money markets, investors were on Wednesday expecting the European Central Bank to implement 1 percentage point of interest rate rises by October, from its current deposit rate of zero. The ECB raised interest rates by half a percentage point in July, its first rise in more than a decade.
The dollar had on Tuesday slipped lower on the back of the disappointing PMI figures, but analysts at ING were “not surprised to see the post-PMI FX moves being quite short-lived,” they wrote, “as the macro picture and solidly hawkish expectations ahead of Jackson Hole should keep the dollar broadly in demand”.
In government debt markets, the yield on Germany’s 10-year Bund, seen as a proxy for borrowing costs across the eurozone, added 0.04 percentage points to 1.36 per cent as its price fell. US Treasuries were broadly flat.
Fonte: Financial Times
