European stocks and US stock futures rise after two days of declines
European stocks and U.S. equity futures rose on Tuesday after two days of declines sparked by concerns about central banks aggressively raising interest rates to tame inflation.
The regional Stoxx Europe 600 stock gauge rose 0.8% in afternoon trading, while Germany’s Dax gained 1.8%. London’s FTSE 100 rose 0.2% after a holiday day.
Meanwhile, Wall Street equity futures rose, with contracts trailing the broad S&P 500 and the tech-heavy Nasdaq 100 up 0.7 and 0.9 percent respectively.
The moves came after global stocks weakened in the previous two sessions as investors responded to hawkish messages at the Jackson Hole economic symposium last week.
Central bankers reaffirmed their commitment to tackling the rapid rate of price growth at the annual Wyoming summit, even as the prospect of tighter monetary policy threatens to induce a prolonged slowdown.
In a speech on Friday, Federal Reserve Chairman Jay Powell said the U.S. central bank “must keep going until the job is done” on inflation.
Some market participants have hinted that stock declines could provide an opportunity to buy stocks at lower prices. “The bottom is a solid bottom – most investors think so – and as we get closer people are happy to pick the quality names off their bucket list,” said Willem Sels, Global Chief Investment Officer. at HSBC Global Private Bank. “But we don’t expect a V rally.”
In Asian equity markets, the Hong Kong Hang Seng closed down 0.4%, after paring steeper declines earlier in the session. Mainland China’s CSI 300 index closed down 0.3%, while Japan’s Topix closed up 1.2%.
At last week’s meeting in Jackson Hole, Powell said a successful reduction in inflation would likely lead to weaker economic growth for “an extended period.”
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told Bloomberg on Monday that he was “pleased” to see markets losing ground after Powell’s speech, as it signaled investors took the pledge seriously. of the Fed to bring inflation down to 2%.
In debt markets, after Monday’s UK holiday, the 10-year gilt yield added 0.14 percentage points to 2.74%. Bond yields rise as their prices fall.
US and Eurozone government bonds remained relatively stable, after coming under pressure in the previous session. The policy-sensitive two-year U.S. Treasury note had at one point on Monday hit its highest level since 2007.
In commodities, gas prices in Europe stabilized after a sharp drop on Monday after German Economy Minister Robert Habeck said Europe’s biggest economy was on track to meet its targets storage for the winter. Futures contracts linked to TTF, the wholesale price of gas in the region, traded on Tuesday at €267 per megawatt hour.
UK gas prices fell sharply on Tuesday after a day-long break in trading, slipping around a fifth to just below 500p per therm.
The price of baseload electricity in Germany also fell, slipping 14% to €651 per megawatt hour after rising above €1,000 on Monday.
Investors will be watching new data in the coming days for further clues about the health of the global economy and the future trajectory of monetary policy. Eurozone inflation data is due out on Wednesday, with economists polled by Reuters expecting the August figure to rise to 9% from 8.9% in July.
U.S. jobs numbers due on Friday could give some insight into the level of heat in the labor market of the world’s largest economy. Economists polled by Reuters expect nonfarm payrolls data to show the United States added 300,000 new jobs in August, up from 528,000 in July.
Additional reporting by William Langley in Hong Kong