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World shares steadied on Friday, sitting just 1% shy of all-time highs, while the dollar languished around one-year lows ahead of a speech by the world's most powerful central banker which markets will peruse for guidance on the shape of U.S. rate cuts.
Europe's broad Stoxx 600 index rose 0.35% after Asian shares outside Japan had nudged down 0.1%, but Japan's Nikkei gained 0.4% as investors digested inflation data and remarks from Bank of Japan governor Kazuo Ueda flagging a willingness to raise interest rates if the economy and inflation turn out as forecast.
That left MSCI's all country world index up a whisker, and with early August's turmoil in the rear view mirror, it is now trading around 1% off its mid July all time peak.
It could get closer to that milestone later in the day with S&P500 futures up 0.55%.
The main event of the week, certainly for bond and currency markets, is still to come however: Federal Reserve Chair Jerome Powell's keynote speech to the Kansas City Fed's annual Jackson Hole Research conference, which comes as U.S. economic data gives the Federal Reserve the green light to cut interest rates.
Markets are fully priced for a 25 bp rate cut in September and see a cut at each of the Fed's three remaining meetings this year, and for one to be a larger 50 bp move.
The speech will be watched carefully to see whether it challenges or underscores such pricing.
"The bond market is just focused on Jackson Hole and whether the extent of rate cuts it is pricing in is correct, the equity markets have a few other things to chew on," said Manish Kabra, lead U.S. equities & multi-asset strategist at Societe Generale.
He said Nasdaq earnings, the U.S. election and the tentative rotation out of large tech stocks were other things to consider.
On the final night of the four-day
Democratic National Convention
, Vice President Kamala Harris promised to be a "realistic," "practical" president for all Americans.
For the bond market, expectations that rate cuts are coming have kept U.S. Treasury prices supported and not giving back their safe-haven gains from early August.
The benchmark 10 year Treasury yield was down 2 basis points at 3.843% - it has only been above 4% for a very brief period in August, after spending almost all of 2024 there.
Its German equivalent was steady at 2.24%.
The low U.S. yields have hurt the dollar, which has lost ground on almost all major peers in August.
The euro was last at $1.1115, steady on the day and just off a 13 month peak hit earlier this week, and sterling was up 0.24% at $1.3125, battling to push through its July 2023 level, which would take it to its highest in well over two years.
The Japanese yen strengthened, with the dollar down 0.2% at 145.85 after Bank of Japan governor Kazuo Ueda flagged an willingness to raise interest rates if the economy and inflation turn out as forecast.
"The yen buying today is understandable given Governor Ueda showed very little sign of a shift in the views and plans of the BoJ following the financial market turmoil earlier this month," said Derek Halpenny, head of research global markets EMEA at MUFG in a note to clients.
Data out early in the day showed Japan's core inflation accelerated for a third straight month, but a slowdown in demand-drive price gains suggest no urgency for any immediate rate hikes.
Oil gained but was still set to end the week lower.
Brent crude futures were up 1% at $77.98 a barrel, although they are down more than 2% for the week as swelling U.S. crude stocks and a weakening demand outlook in China have raised pessimism.
Gold prices are up 0.6% to $2,499.3 an ounce, recharging towards its record high of $2,531.6 hit just on Tuesday.
(Reporting by Stella Qiu in Sydney and Alun John in London Editing by Shri Navaratnam, Kim Coghill and Chizu Nomiyama)