Associated Press
- Global stocks jumped on Friday as traders wagered Federal Reserve Chair Jerome Powell will confirm an expected cut to interest rates in September during his speech today.
- Markets are pricing in about a 94% chance of a rate cut in September, and President Donald Trump has called for more aggressive reductions.
- However, strong employment and retail sales data, along with resistance from three Fed policymakers, means another rate cut isn't guaranteed.
- "To say that the stakes are high for the meeting is an understatement," one analyst said.
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Global stocks jumped on Friday as traders wagered Federal Reserve Chair Jerome Powell will confirm an expected cut to interest rates in September during his speech in Jackson Hole, Wyoming today.
"To say that the stakes are high for the meeting is an understatement," Jasper Lawler, head of research at London Capital Group, said in a morning note. "Powell will take to the stage less than a month after the Fed's first interest rate cut in a decade and amid market expectations of another cut next month."
Markets are pricing in about a 94% chance of a rate cut in September, Lawler said. A surprise contraction in domestic manufacturing activity this month, according to IHS Markit data released this week, has fueled hopes of central bank action.
President Donald Trump is also pressuring Powell and the Fed to take more aggressive action, and has called for a cut of 100 basis points.
However, employment and retail sales data have remained strong, pointing to a robust US economy. Three of the Fed's policymakers - Esther George, Patrick Harker, and Eric Rosengren -are also opposed to further rate cuts.
"Unless the hard economic data suggest a steep decline in the US economy's trajectory, then policymakers need not embark on a major easing cycle," Han Tan, market analyst at FXTM, said in a morning note. "Instead, they can be contented with just some 'insurance' rate cuts."
Here's the market roundup as of 10:00 a.m. (5:00 a.m. EST):
- Asian indexes rose with China's Shanghai Composite and Hong Kong's Hang Seng up 0.5%, while Japan's Nikkei was up 0.4%.
- European equities climbed with Britain's FTSE 100 up 0.7%, and Germany's DAX and the Euro Stoxx 50 up 0.6%.
- US stocks are poised for a positive open. Futures underlying the Dow Jones Industrial Average, the S&P 500, and the Nasdaq were up between 0.4% and 0.6%.
- Oil prices are almost flat with West Texas Intermediate crude at $55.40 a barrel, and Brent crude at $59.90.
- Gold slid by 0.2% to $1,506.
