Markets

Global stocks climb as traders look to Jackson Hole meeting

Investors look past rise in European Covid-19 cases as focus remains on vaccine

Asian equities were buoyant after recent weeks of caution over the regional spread of coronavirus.

Mon Aug 24 2020 - 11:20

Global stocks kicked off Monday on a high note as investors look ahead to the Federal Reserve’s economic symposium this week.

European equities took a lead from Asia, which climbed on the heels of Wall Street’s fourth straight week of gains.

Traders looked beyond the rising coronavirus caseload in Europe, which has unsettled some regional governments, and instead focused on continued signs of progress on developing a vaccine.

The Trump administration is considering bypassing US regulatory standards to fast-track an experimental vaccine being developed in the UK by Oxford university and AstraZeneca before the November general election, the Financial Times reported at the weekend.

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Europe’s Stoxx 600 rose 1.3 per cent in early Monday trading while Frankfurt’s Dax and the CAC 40 in Paris advanced 1.4 per cent. London’s FTSE 100 gained 1.2 per cent. S&P 500 futures rose 0.4 per cent.

Market participants said in addition to Covid-19 developments, they would be paying close attention to the Kansas City Fed’s virtual Jackson Hole economic summit. Economists are expecting Jay Powell, the central bank chair, to offer new details of the Fed’s wide-ranging review of monetary policy.

“Indications that the Fed might adopt a so-called flexible-average-inflation-targeting approach could lead yields and rates of market-based inflation compensation slightly higher, while keeping a lid on real rates,” UniCredit analysts said in a note on Monday.

Minutes from the Fed’s July meeting, released last week, briefly weighed on market sentiment after the central bank threw cold water on the idea that it might soon consider taking measures aimed at capping longer-term government bond yields.

The other US event to take centre stage this week will be the four-day Republican national convention when Donald Trump will accept his party’s renomination to run for a second term as president.

Asian equities were buoyant after recent weeks of caution over the regional spread of coronavirus. Hong Kong’s Hang Seng index added 1.6 per cent while the CSI 300 gauge of Shanghai and Shenzhen-listed stocks rose 0.8 per cent. In Tokyo, the Topix edged 0.2 per cent higher and South Korea’s Kospi index gained 1.1 per cent.

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Chinese tech group Tencent jumped 4.2 per cent, the most in two weeks, after it was reported that a White House executive order banning its WeChat app may not be as severe as previously believed.

President Trump this month gave American companies 45 days to stop their “transactions” with the app. The move has prompted legal action from a coalition of users and came as tensions rise between Washington and Beijing.

Meanwhile, Brexit talks between Brussels and London rumble on. Another round of talks on Friday broke up with “little progress” and some rancour between the two sides.

“Unfavourable developments increased the risk of a ‘no-deal’ Brexit with time fast running out,” currency analyst Lee Hardman at MUFG said on Monday.

“Despite the lack of progress, market participants remain of the view though that a last-minute deal will be reached to avoid providing another negative shock to Covid-hit economies,” Mr Hardman said. “Continued optimism that a deal will eventually be struck is helping to dampen the negative pound reaction in the near-term.”

The pound was little changed against the euro. One euro bought 90.12p on Monday morning. – Copyright The Financial Times Limited 2020

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