Bonds sold, stocks bought as investors eye Jackson Hole

(Reuters) – Traders sold government bonds and bought stocks on Wednesday, placing riskier bets on optimism about U.S.-China trade and expectations of ample central bank stimulus before a key speech by the U.S. Federal Reserve chairman at Jackson Hole.

In early London trading, the yield on U.S. 10-year debt rose as high as 0.7190%, close to a two-month peak, as bond traders begin to price in a return to inflation and growth for major economies.

The broad Euro STOXX 600 turned positive in early trading to gain 0.2%, with indexes in Frankfurt and Paris both up a similar amount, though London fell 0.2%.

The MSCI world equity index, which tracks shares in 49 countries, gained 0.1%. Wall Street futures gauges were flat.

A day earlier, investors had dumped benchmark U.S. debt [.US] and bought stocks after a productive call between top Beijing and Washington officials stoked hopes of smoother trade relations between the world’s two biggest economies.

In another sign of a more positive mood, safe-haven gold fell 0.6%, on course for a fourth straight day of losses.

Euro zone bonds calmed, with safe-haven Bund yields rising a smidgeon after enduring on Tuesday their worst session since May as better German economic data and trade dented hunger for government debt.

For many investors, bets on looser policy – the major driver of a powerful recovery for U.S. stocks from pandemic-driven lows in March – were at the forefront.

Fed Chairman Jerome Powell is due to speak at a virtual Jackson Hole symposium on Thursday, where investors think he could outline a more accommodative approach to inflation which would open the door to easier policy for a long time to come.

“Jackson Hole is a big one,” said Jeremy Gatto, an investment manager at Unigestion in Geneva.

“Investors are expecting a bit more clarity on what the Fed is looking at. We are likely to see a high level of accommodation for some time to come.”

Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan traded flat.

DATA AND THE DOLLAR

The dollar edged up slightly, after a knock a day earlier on data that showed U.S. consumer confidence falling to the lowest in over six years because of worries over the impact of the coronavirus pandemic on jobs.

Against a basket of currencies the dollar added 0.1% to 93.070, with prospects for the greenback seen as limited should Powell send a dovish message at Jackson Hole.

Data due later in the day is forecast to show growth in U.S. durable goods orders slowed in July, potentially offering further bad news for the dollar.

The Japanese yen fell 0.1%, with MUFG analysts arguing that uncertainty over the health of Shinzo Abe, the long-serving premier, was adding to downward pressure along with advances for stocks and rising U.S. yields.

In commodity markets, a positive mood on trade and U.S. producers shutting most of their offshore output in the Gulf of Mexico ahead of Hurricane Laura supported Brent crude oil.

Producers evacuated 310 offshore facilities and shut 1.56 million barrels per day of crude output, 84% of Gulf of Mexico’s offshore production – near the 90% outage that Hurricane Katrina brought 15 years ago.

Brent futures added 13 cents, or 0.3%, to $45.99 a barrel in early trading, with the benchmarks settled at a five-month high a day earlier.

NEWS and COMMENTARY

Gold flat as growth risks offset trade hopes; Powell speech in focus

Record Gold Prices: Real Yields Aren’t Really Responsible

How Long Can The Gold Rally Last?

Central bankers face virus hit to global economy at crisis forum

Silver Market Update – another upleg looking imminent…

GOLD PRICES (USD, GBP & EUR – AM/ PM LBMA Fix)

25-Aug-20 1925.45 1911.15 1468.35 1455.15 1626.43 1616.26
24-Aug-20 1947.55 1943.95 1484.03 1485.57 1646.26 1643.61
21-Aug-20 1932.85 1924.35 1465.87 1470.20 1635.58 1637.04
20-Aug-20 1928.05 1927.15 1471.68 1469.84 1630.55 1629.60
19-Aug-20 1993.15 1981.00 1504.23 1498.63 1668.47 1658.30
18-Aug-20 2005.15 2008.75 1522.51 1517.61 1684.53 1680.52
17-Aug-20 1949.85 1972.85 1488.13 1505.68 1645.87 1661.53
14-Aug-20 1948.30 1944.75 1491.42 1482.09 1653.33 1643.31
13-Aug-20 1931.00 1944.25 1476.06 1482.30 1632.47 1640.17
12-Aug-20 1931.70 1931.90 1479.10 1483.70 1642.14 1640.57
11-Aug-20 1996.60 1939.65 1524.40 1479.57 1694.51 1646.76
10-Aug-20 2030.30 2044.50 1552.98 1561.38 1725.35 1734.96


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Mark O'Byrne

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