(Bloomberg) — U.S. stock futures rose ahead of Jerome Powell’s speech in Jackson Hole, with traders speculating on whether the Federal Reserve chairman will open the door to rate cuts.
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Futures on the S&P 500 rose 0.3% and European stock contracts rose slightly. The 10-year Treasury yield was steady at 3.84% as the dollar retreated. The yen strengthened after hawkish comments from Bank of Japan Governor Kazuo Ueda.
Powell’s speech later Friday at the annual symposium in Wyoming has been hanging over markets all week. Stocks and bonds took a hit Thursday on concerns he would use the speech to throw cold water on market expectations for aggressive rate cuts.
“The big question for investors is to what extent Powell confirms expectations for a rate cut in September, and whether he provides any indication of how big a rate cut might be,” said Jim Reid, a strategist at Deutsche Bank AG.
The latest U.S. economic data was mixed. U.S. jobless claims data showed the labor market cooling only gradually — rather than slowing rapidly amid higher tariffs. U.S. manufacturing activity shrank at the fastest pace this year. And existing-home sales rose for the first time in five months.
Ahead of the Jackson Hole meeting, “it may be a very high bar for Powell to outperform the markets,” said Christopher Wong, FX strategist at Oversea-Chinese Banking Corp. “But at the same time, I doubt many expect him to do that — so as long as there’s no hawkish surprise from his speech, markets are happy to continue trading in the Goldilocks theme, i.e., fading rallies in the dollar.”
Swap traders still expect rates to be cut by almost 100 basis points through December.
The Yen’s Gain
Meanwhile, Japan’s currency rose as much as 0.7% against the dollar. In answers to lawmakers, Bank of Japan Governor Kazuo Ueda indicated that the central bank is still on track to raise interest rates if inflation and economic data remain in line with forecasts.
Ueda’s comments in parliament “ended speculation that the BOJ could hold off on further rate hikes amid market turbulence,” said Charu Chanana, head of currency strategy at Saxo Markets. “Keeping the door open for further rate hikes is positive for the yen and negative for margin equities.”
Earlier, Japanese inflation data beat forecasts. Consumer prices rose 2.8% in July from a year earlier, the same as the previous month and higher than the 2.7% that economists had expected.
Important events this week:
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US New Home Sales, Friday
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Jerome Powell speaks in Jackson Hole, Friday
Some of the major moves in the markets:
Shares
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S&P 500 futures rose 0.3% at 7:34 a.m. London time
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Nasdaq 100 futures rose 0.5%
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Futures on the Dow Jones Industrial Average rose 0.2%
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The MSCI Asia Pacific Index rose 0.2%
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The MSCI Emerging Markets Index fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro remained virtually unchanged at $1.1123
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The Japanese yen rose 0.5% to 145.60 per dollar
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The offshore yuan rose 0.1% to 7.1375 per dollar
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The British pound rose 0.2% to $1.3112
Cryptocurrency
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Bitcoin rose 0.3% to $60,868.24
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Ether rose 1.8% to $2,672.97
Bonds
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The yield on 10-year government bonds remained virtually unchanged at 3.85%
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The German 10-year yield remained virtually unchanged at 2.24%
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The UK 10-year yield rose seven basis points to 3.96%
Raw materials
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Brent crude oil little changed
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Spot gold rose 0.3% to $2,491.68 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Winnie Hsu and Richard Henderson.
(An earlier version was corrected to say markets expect the Fed to cut rates by about 100 basis points this year.)
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