European shares and US stock futures turned higher on Tuesday, following two days of declines triggered by concerns that central banks would raise interest rates aggressively to tame inflation.
The regional Stoxx 600 share gauge added 0.7 per cent by mid-morning, while Germany’s Dax gained 1.9 per cent. London’s FTSE 100 rose 0.1 per cent, after it resumed trading after a holiday.
Those moves came after global equities weakened in the previous session, following last week’s annual economic symposium in Jackson Hole, Wyoming. Central bankers reaffirmed their commitment to tackle rapid price growth at the summit, even as the prospect of tighter monetary policy threatens to induce a protracted slowdown.
In a hawkish speech on Friday, Federal Reserve chair Jay Powell said the US central bank “must keep at it until the job is done” on inflation.
Wall Street stock futures showed signs of stabilising on Tuesday, with contracts tracking the broad S&P 500 and the technology-heavy Nasdaq 100 up 0.9 and 1.1 per cent respectively.
Investors could take advantage of the recent fall in prices to buy coveted stocks cheaply, said Willem Sels, global chief investment officer at HSBC Global Private Bank. “The bottom is a solid bottom — most investors think that — and as we approach it, people are happy to pick up the quality names on their bucket list,” he said. “But we’re not expecting a V-shaped rally.”
Expectations of persistently high interest rates weighed on Chinese equities earlier in the session, with Hong Kong’s Hang Seng index falling as much as 1.9 per cent before trimming its losses to close 0.4 per cent lower. The mainland CSI 300 index finished 0.3 per cent lower. Japan’s Topix had a brighter day, up 1.3 per cent.
At last week’s meeting in Jackson Hole, Powell said successfully reducing inflation would probably result in lower economic growth for “a sustained period”.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said he was “happy” to see markets lose ground following Powell’s speech, because it indicated that investors had taken the Fed’s commitment to bring inflation back to 2 per cent seriously.
As UK markets reopened, the yield on the UK’s 10-year gilt added 0.11 percentage points on Tuesday to more than 2.7 per cent, catching up after large moves for other government bonds on Monday. The policy-sensitive two-year US yield had on Monday hit its highest level since 2007, as the price of the debt instrument fell.
Other government bond markets were relatively subdued during European morning trading, with the yield on the benchmark 10-year US Treasury note slipping 0.03 percentage points lower to 3.08 per cent and the equivalent German yield trading flat.
In currencies, the dollar slipped 0.4 per cent, having made gains since Powell’s comments in Wyoming.
Fresh economic data due in the coming days will be scrutinised by investors for further clues about the health of the global economy, and how far and fast central banks will move to raise interest rates.
Eurozone inflation figures for August will be released on Wednesday, with economists polled by Reuters expecting a year-on-year reading of 9 per cent, up from 8.9 per cent in July.
US jobs data due on Friday may offer insights into the level of heat in the labour market of the world’s biggest economy. Economists polled by Reuters expect non-farm payrolls data to show the US added 300,000 new jobs in August.
Additional reporting by William Langley in Hong Kong
Source: Economy - ft.com
