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Stocks lifted by tech; dollar up ahead of Powell: markets wrap

Stocks lifted by tech; dollar up ahead of Powell: markets wrap
A man walks in front of the display showing stock indices, in Shanghai, China, 4 August 2022. (Photo: EPA-EFE / Alex Plavevski)

An Asian stock gauge rose on Friday, helped by China’s technology sector, while the dollar ticked up before a speech by Federal Reserve chair Jerome Powell that’s set to shape views on US monetary tightening.

The regional index hit a one-week high as Chinese tech shares in Hong Kong extended a rally. S&P 500 futures were steady after a climb in US shares.

Hong Kong and China are benefiting from signs of progress on averting the delisting of Chinese shares in the US over an auditing dispute. Beijing’s efforts to step up stimulus for an ailing economy have also aided sentiment.

Fed officials gathering for an annual conference in Jackson Hole, Wyoming have already conveyed a chorus of hawkish comments. Powell is expected to restate the resolve to keep hiking interest rates to fight inflation on Friday.

Treasuries slipped, pushing the US 10-year yield toward 3.05%. Oil scaled $93 a barrel. Gold and Bitcoin edged lower.

A rebound in stocks and bonds from June lows has left financial conditions at easier levels than before the Fed began its aggressive tightening campaign. The question is whether Powell will try to reset market expectations to ensure that the brakes continue to be applied to economic activity.

“The Fed does have a lot of work to do in terms of just talking markets to price in a potentially higher terminal rate,” Diana Amoa, chief investment officer for long-biassed strategies, at Kirkoswald Asset Management LLC, said on Bloomberg Television.

US central bankers at Jackson Hole stressed the need to keep raising rates. Kansas City Fed President Esther George said that a peak higher than 4% can’t be ruled out. The bond market remains divided on whether the Fed will hike by 50 basis points or 75 basis points in September. 

Jackson Hole may not be a “negative market shock because expectations are hawkish while exposure is still low,” said Dennis DeBusschere, founder of 22V Research. “We thought the market correction would be leading into Jackson Hole, and that has largely played out,” he said.

The latest US growth data pointed in different directions in the first half of 2022, adding to the ongoing debate on the health of the economy. BM


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