The S&P 500 rose for a second straight day, gaining 1.4%, while the tech-heavy Nasdaq Composite rose 1.7%. The increases, along with steady gains in Asian markets, helped the FTSE All-World Index to rise 1.2%. Europe’s Stoxx 600 rose 0.3 percent. The moves came on the first day of the annual conference in Jackson Hole, Wyoming, where central bankers, including Federal Reserve Chairman Jay Powell, gathered to discuss future challenges for the global economy. The event, hosted by the Fed’s Kansas City arm, is being watched closely by investors for signals about the future direction and pace of monetary policy. Kansas City Fed President Esther George told CNBC on Thursday that the U.S. still has “high . . . broad-based inflation,” but it was “too early” to say whether the central bank would raise interest rates by 0.75 percentage points for a third consecutive meeting in September. Market pricing shows investors expect the Fed to raise borrowing costs to 3.7% by February 2023, up from expectations of 3.3% in early August. The central bank’s target range is 2.25% to 2.50%. At Jackson Hole, Powell “would recognize the weakening of the growth cycle and . . . the narrow path to a soft landing,” said Joseph Little, global chief strategist at HSBC Asset Management. The emphasis on inflation control “means the market is right to price in an early Fed pivot and move near-term interest rate expectations toward a ‘raise and watch’ approach.” But others expected a softer approach. “We think the Fed’s tone is starting to change,” said Thomas Costerg, senior U.S. economist at Pictet Wealth Management. “Powell is likely to remain vague on next steps, but we still expect him to indicate that the bias is toward a reduction in the pace of walk rates.” European bond markets recovered losses ahead of central bankers’ monetary policy speeches, with Bank of England Governor Andrew Bailey and European Central Bank executive board member Isabel Schnabel also set to speak in Jackson Hole. The yield on two-year UK debt, which is sensitive to changes in expectations of short-term interest rates, fell 0.12 percentage points to 2.78 percent and the yield on German two-year debt lost 0.06 percentage points to 0. 75 percent. Bond yields fall when prices rise. This came after a sell-off in short-term instruments on Wednesday as investors became more concerned about the BoE raising interest rates and the ECB being more aggressive in curbing inflation. The yield on the benchmark US 10-year note fell 0.08% to trade at 3.03%. The recent bond volatility comes at a time of weaker liquidity in European fixed income markets due to the summer holidays and heightened economic uncertainty. Earlier on Thursday, Asian stock markets posted gains, with Hong Kong’s Hang Seng closing up 3.6 percent and mainland China’s CSI 300 index up 0.8 percent after the announcement of China’s stimulus package. China’s State Council, its cabinet, announced on Wednesday the addition of 300 billion Rmb ($44 billion) in credit support from its policy banks, the state-controlled institutions Beijing uses to spur economic growth. In currency markets, the dollar index, which tracks the U.S. currency against a basket of six peers, fell 0.2 percent. The euro briefly rose above parity with the dollar before retreating back to $0.998, up 0.1 percent on the day.
