By Huw Jones
LONDON (Reuters) – Wall Street was headed for a flat start on Wednesday as investors take a breather after pushing stock indexes to new highs ahead of a keenly awaited Federal Reserve speech on Friday.
Dow, S&P 500 and Nasdaq 100 futures were narrowly mixed after the S&P stock index posted its 50th record high close of the year on Tuesday, buoyed by positive news on COVID-19 vaccines. The tech-laden Nasdaq also high new highs.
Markets globally were looking ahead to Friday, when Jerome Powell, chair of the U.S. Federal Reserve, is due to speak at the annual Jackson Hole event.
There have been high expectations that Powell might indicate when the central bank could begin “tapering” or easing stimulus to an economy now recovering from COVID-19.
John Vail, chief global strategist at Nikko asset management, said the market was already expecting a taper to start this year, with no new information expected from Jackson Hole.
“With less central bank buying, bond yields will likely rise globally, but not too much,” Vail said. “However, this will likely be a reason for cyclical and financial stocks to perform well even though the global economy may decelerate more than expected to a more average rate going forward.”
While data remains robust, there are clear signs the global economy is losing momentum following an early-2021 rebound from last year’s pandemic-driven slump.
Citi’s global economic surprise index, which measures the degree to which the data is beating or missing economists’ forecasts, this week turned negative for the first time since last June, indicating more misses than beats.
The equivalent U.S. and Chinese indexes turned negative some weeks ago.
A U.S. Commerce Dept. report, due at 1230 GMT, is expected to show durable goods orders fell 0.3% in July, after rising 0.9% in June.
The yield on benchmark 10-year Treasury notes was last at 1.3087% above its U.S. close on Tuesday of 1.29%.
The dollar was slightly firmer, trading above a one-week low versus other major peers.
Graphic: Global economic surprises – https://fingfx.thomsonreuters.com/gfx/mkt/akpezzedzvr/Pasted%20image%201629875940713.png
In Europe, the STOXX index of 600 companies was slightly firmer, around 5 points below its record high from earlier this month.
Fund managers expect European stocks to hold around current levels for the rest of 2021, a Reuters poll showed.
Business morale in Germany, Europe’s biggest economy, fell for the second month running in August, pointing to a loss of momentum due to worries over rising COVID cases and supply bottlenecks.
The DAX blue-chip index in Frankfurt shed modest early gains to trade slightly weaker.
Ifo in August https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkkaqopx/Pasted%20image%201629879732088.png
CRUDE EDGES UP
U.S. crude reversed earlier softness to edge up to $67.69 a barrel, while Brent crude gained 0.45 to $71.37 per barrel. Both are up around 8% on the week, however, after posting their biggest weekly decline in more than nine months last week. [O/R]
Safe-haven gold fell in tandem with the broad increase in risk appetite, with the spot price dropping 0.4% to $1,794 per ounce. [GOL/]
Asian shares held on to their recent gains after last week’s pummelling, as global equities rebounded, though the focus for most asset classes was on the upcoming Fed event.
MSCI’s broadest index of Asia-Pacific shares outside Japan spent most of the day near flat, but was last up 0.3%, and about 4% higher so far this week.
This marks a change from last week, when the index fell to its lowest in 2021, spooked by a combination of fears about slowing growth in Asia amid outbreaks of the Delta variant of the coronavirus, and worries the Fed might begin shrinking its monetary stimulus sooner rather than later.
Japan’s Nikkei was also flat, but a Reuters poll of analysts and fund managers showed Japanese shares are expected to recover from their eight-month low marked on Friday to near a 30-year high by the end of this year.
Wall Street to hold fire in record high territory