Global markets in buoyant mood as Fed chair’s speech nears

London — Global equities, bond yields and oil rose on Tuesday as a bounce in China’s tech sector, positive US vaccination news and easing worries about the US tapering stimulus lifted sentiment ahead of a speech later this week by Fed Chair Jerome Powell.

Stocks in Asia, Europe and Wall Street futures all made gains, setting them on a recovery course after Chinese regulatory worries triggered a sell-off last week.

The MSCI’s broadest index of Asia-Pacific shares outside Japan rallied 1.7% while in Europe, the pan-European Stoxx 600 added 0.2% to the previous session’s gains.

Nasdaq and S&P 500 futures rose 0.3% and 0.5% respectively.

“I believe the cheery mood across US equities is here to stay in the run up to the Jackson Hole meeting, as Fed Chair Jerome Powell could only soften the hawkish tone of last week’s FOMC minutes,” Ipek Ozkardeskaya, an analyst at Swissquote, said in a note.

Worries that the Fed was edging closer to tapering its stimulus weighed on global markets last week, but investors are now less confident that Powell’s speech at Jackson Hole will indicate a timeline for winding down the bond-buying programme.

“The rising Covid cases and the soft data can only keep the Fed alert and reluctant to act prematurely. And that’s all the market wants to hear,” Ozkardeskaya added.

A sharp increase in Covid-19 infections caused by the highly contagious Delta variant have fuelled concerns about the recovery but the US Food and Drug Administration granting full approval on Monday to the vaccine developed by Pfizer raised hopes that inoculations could accelerate.

The improved sentiment drove the dollar down against its Australian and Canadian counterparts as well as the Norwegian krone and Swedish krona.

At 08.20am GMT, the dollar was flat on the day at 93.011 versus a basket of currencies. It hit a five-day low of 92.947 on Monday and suffered its largest one-day drop since May.

Last week, the dollar index hit a nine-month high on bets that the Fed would start shifting away from its accommodative monetary policy, but that view began to change on Friday when Dallas Fed President Robert Kaplan said he might reconsider his hawkish stance if the coronavirus harms the economy.

The yield on benchmark 10-year Treasury notes rose to 1.2684% while eurozone bond yields were flat as with investors focused on issuance in a data-light session.

In commodities markets, Brent crude oil futures added 1.2% to $69.50 a barrel after rallying more than 5% on Monday, as a weaker dollar and strong global equities markets boosted crude after seven sessions of declines.

Gold prices eased but remained slightly above the psychological level of $1,800 per ounce.

Reuters