Stocks, dollar up as clock ticks to Powell speech: markets wrap

An Asian stock index rose Friday and the dollar was firm ahead of a much anticipated speech by Federal Reserve Chair Jerome Powell that’s set to shape views on the pace of US monetary tightening.

The regional index hit a one-week high amid gains in Japan and Hong Kong, where a tech gauge extended a rally. S&P 500 and Nasdaq 100 futures dipped after a climb in US shares. European futures added about 0.5%.

Hong Kong’s bourse is benefiting from apparent progress on averting the delisting of Chinese shares in the US over an audit dispute. Beijing’s efforts to step up stimulus for China’s ailing economy have aided investor sentiment too.

Meanwhile, Fed officials gathering for a conference in Jackson Hole, Wyoming conveyed a chorus of hawkish comments. Powell is expected to restate the Fed’s resolve to keep hiking interest rates to fight elevated inflation when he speaks at 10 a.m. Washington time on Friday.

Treasuries slipped, pushing the US 10-year yield to 3.05%. Oil scaled $93 a barrel. Gold and Bitcoin edged lower.

A rebound in stocks and bonds from June lows has left financial conditions at easier levels than before the Fed began its aggressive tightening campaign. The question is whether Powell will try to reset market expectations to ensure that the brakes continue to be applied to economic activity.

“The Fed does have a lot of work to do in terms of just talking markets to price in a potentially higher terminal rate,” Diana Amoa, chief investment officer for long-biased strategies, at Kirkoswald Asset Management LLC, said on Bloomberg Television.

US central bankers at Jackson Hole stressed the need to keep raising rates. Kansas City Fed President Esther George said that a peak higher than 4% can’t be ruled out. The bond market remains divided on whether the Fed will hike by 50 basis points or 75 basis points in September.

Jackson Hole may not be a “negative market shock because expectations are hawkish while exposure still low,” said Dennis DeBusschere, founder of 22V Research. “We thought the market correction would be leading into Jackson Hole, and that has largely played out,” he said.

The latest US growth data pointed in different directions in the first half of 2022, adding to the ongoing debate on the health of the economy.

What to watch this week:

• 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

• S&P 500 futures fell 0.2% as of 6:40 a.m. in London. The S&P 500 rose 1.4%
• Nasdaq 100 futures shed 0.2%. The Nasdaq 100 rose 1.8%
• Japan’s Topix index rose 0.2%
• Australia’s S&P/ASX 200 index added 1%
• South Korea’s Kospi index was flat
• Hong Kong’s Hang Seng index increased 0.5%
• China’s Shanghai Composite index fell 0.1%
• Euro Stoxx 50 futures climbed 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro was at $0.9963, down 0.1%
• The Japanese yen was at 136.80 per dollar, down 0.2%
• The offshore yuan was at 6.8624 per dollar, down 0.2%

Bonds

• The yield on 10-year Treasuries rose about three basis points to 3.05%
• Australia’s 10-year yield fell 10 basis points to 3.58%

Commodities

• West Texas Intermediate crude was at $93.22 a barrel, up 0.8%
• Gold was at $1 756.32 an ounce, down 0.1%.