Global shares remain buoyant ahead of US Fed chair’s speech

London/Hong Kong — Global shares held steady near record highs on Friday as investors caught their breath ahead of a much-anticipated speech by the US. Fed chief that could give clues about when the central bank will start tapering its bond-buying programme.

Europe’s pan-European Stoxx 600 index was last trading flat after MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.17%, capping its best week since February as Chinese markets cheered a burst of central bank liquidity.

While MSCI’s global share index was flat, US stock futures were up 0.3%, suggesting fresh optimism after sentiment on Thursday was dented by a deadly attack in Afghanistan, and after the US Federal Reserve’s more hawkish policymakers urged an end to stimulus.

But moves were small as many traders kept their powder dry ahead of the main market event of the week: Fed Chair Jerome Powell’s speech at 2pm GMT in the Kansas City Fed’s central banking conference, normally held in Jackson Hole, Wyoming, which has been used by the bank in the past to provide guidance on future policy.

“At this stage, it is evident that the committee is increasingly leaning towards the desire to commence a taper of their asset purchases,” said James Athey, investment director at Aberdeen Standard Investments.

“Powell will presumably need to recognise that reality without committing to any specifics before those specifics have been agreed among the voting members of the committee.”

With a range of expectations among investors ahead of the speech, there were likely to be market moves regardless of where Powell’s words fall on the “hawk/dove spectrum”, Athey said.

And the potential for investor disappointment is high. Analysts at RBC said in a note that while much of the summer had been spent waiting for the event, there was “scepticism that the Fed will provide more specific information around a timetable … amid a rise in Delta variant Covid-19 cases.”

Ahead of the speech, public remarks by the Fed's more hawkish speakers on Thursday urging the central bank to begin paring bond purchases weighed on Wall Street, which closed slightly lower, ending a streak of the highest closing highs in its history.

Early market cheer on Friday was provided by the Chinese central bank's biggest weekly cash injection into the banking system since February.

Chinese blue chips rose 0.45%, a reversal of recent weeks in which mainland stocks have weighed on the region, while Hong Kong’s benchmark rose 0.15%.

Recent regulatory crackdowns have roiled sectors from property to tech and wiped half a trillion dollars from China's markets in last week alone.

“A-shares [onshore Chinese shares] and Hong Kong are taking a break after some pretty extreme movements in the last two weeks,” said Qi Wang, CEO of MegaTrust Investment (HK).

“Investors are grappling with the regulatory risk versus still strong earnings.”

But it was anticipation of Powell's speech that was tempering market enthusiasm globally.

The dollar and US yields were little moved.

The yield on benchmark 10-year treasury notes was 1.3441%, down from a two-week high of 1.375% set the day before, but barely changed from the US close.

Gold rose 0.3% to $1,797.40/oz as some investors sought safety ahead of the speech.

US crude rose 1.7% to $68.58 a barrel, Brent crude rose 1.5% to $72.12 per barrel, as energy companies began shutting production in the Gulf of Mexico ahead of a potential hurricane this weekend.

Reuters