Stocks See cautious trades ahead of the Fed, BOJ Events: Markets close

(Bloomberg) — European stocks were set for a break as sentiment cooled ahead of key events from the Federal Reserve and the Bank of Japan.

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Euro Stoxx 50 futures were little changed, along with US equity contracts. The MSCI Asia Pacific index pared a 0.4 percent advance as benchmarks in Japan and Hong Kong retreated from session highs. This comes after the S&P 500 and Nasdaq 100 posted modest gains on further signs that the Fed will cut interest rates.

The muted moves indicate a degree of caution ahead of President Jerome Powell’s speech at the Jackson Hole Economic Symposium on Friday. US rate cut bets have rallied in recent sessions, with the latest dovish signal coming from Fed minutes that showed several officials acknowledged a plausible case for rate cuts.

Regarding the Jackson Hole event, “risk-taking may be limited by the fear of any disappointment from the Fed chairman,” said Jun Rong Yeap, market strategist at IG Asia Pte. “Markets are in this wait-and-see phase as the US dollar tries to stabilize following a recent sell-off.”

A Bloomberg gauge of dollar strength rose a notch after a recent bout of weakness. MSCI’s EM currency index fell for a second day, while the yen fluctuated after four straight sessions of gains.

BOJ Governor Kazuo Ueda will face intense market scrutiny on Friday when he speaks to lawmakers after the central bank’s brutal signals contributed to global market turmoil earlier this month.

US government debt was little changed in Asian trade after gains for short-term Treasuries in the previous session sent two-year yields down nearly 10 basis points before paring the move. Traders again priced in more than 1 percentage point for Fed easing until the end of 2024 starting next month.

Elsewhere, Bank of Korea Governor Rhee Chang-yong said several members were open to an interest rate cut in the next three months after keeping borrowing costs steady.

Shares of Xiaomi Corp. rose more than 8 percent on better-than-expected second-quarter results, supporting a gauge of China’s tech stocks. That followed a flurry of mixed gains from heavyweights including Alibaba Group Holding Ltd.

“Confidence isn’t really coming back in big waves,” Herald van Der Linde, strategist at HSBC Holdings Plc, told Bloomberg TV. “We need to see confirmation that earnings are holding up. If that holds, China can perform.”

Job review

A likely revision to US jobs growth added further evidence for traders to expect a rate cut in September. The number of workers on payrolls is likely to be revised down by 818,000 for the 12 months through March — or about 68,000 fewer each month — according to the Bureau of Labor Statistics’ preliminary revision of the benchmark. It was the biggest downward revision since 2009.

The story continues

In commodities, oil edged lower as concerns about a U.S. slowdown outweighed gains from falling inventories. Gold also sold off after trading near a record high on Wednesday on expectations of a Fed rate cut.

Key events this week:

• Eurozone HCOB PMI, consumer confidence, Thursday

• The ECB publishes the July rate decision report on Thursday

• US Initial Jobless Claims, Existing Home Sales, S&P Global PMI, Thursday

• Japan’s CPI on Friday

• BOJ’s Kazuo Ueda will attend a special session in Japan’s parliament on Friday to discuss the July hike

• US new home sales on Friday

• Jerome Powell speaks in Jackson Hole on Friday

Some of the main movements in the markets:

Stocks

• S&P 500 futures were little changed as of 2:29 p.m. Tokyo time

• Nasdaq 100 futures were little changed

• The Japanese Topix has been changed a bit

• Australia’s S&P/ASX 200 rose 0.3%

• Hong Kong’s Hang Seng rose 0.5%

• The Shanghai Composite was little changed

• Euro Stoxx 50 futures were little changed

Coins

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1144

• The Japanese yen was little changed at 145.08 per dollar

• The offshore yuan was little changed at 7.1279 per dollar

Cryptocurrencies

• Bitcoin fell 0.8% to $60,734.17

• Ether was down 0.3% at $2,623.44

BONDS

commodities

• West Texas Intermediate crude fell 0.1% to $71.84 a barrel

• Spot gold was down 0.4% at $2,503.40 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from Winnie Hsu, Mia Glass, Abhishek Vishnoi, David Ingles and Yvonne Man.

(An earlier version of the story corrected the day of Ueda’s meeting with lawmakers.)

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