Stocks dropped, yields rose and the dollar strengthened ahead of the second day of the central bank symposium in Jackson Hole. Federal Reserve Chairman Jerome Powell is set to take the stage Friday at the gathering in the US state of Wyoming. At the same meeting of central bankers last year, Powell warned markets that the US is heading towards a long period of restrictive monetary policy, causing equity markets to plummet more than 3% on the day and 13% in the following month.
In New York, stock markets finished the day weak on Thursday. Early gains disappeared throughout the session. The Dow Jones Industrial lost 1.1%, falling to 34,099.42 points and the S&P 500 closed down 1.35% at 4376.31 points. Nvidia’s earnings report gave the technology-heavy Nasdaq stock indices a short-term boost, but the gains crumbled quickly during Thursday’s session. The Nasdaq-100 lost 2.19% by the end of the day, finishing at 14,816.44 points.
In Asia, stock markets were similarly weak at the start of Friday’s session. Some macroeconomic data was thrown into the mix, with the core inflation rate in the city of Tokyo coming in at 2.8% in August, slightly below market expectations. Headline inflation in Tokyo was 2.9%, coming down slightly from 3.2% in July. The Nikkei 225 was trading down more than 2% on Friday. Hong Kong's Hang Seng Index dropped 1.2%, while the Shanghai Composite slipped 0.7%. In South Korea, the Kospi lost 0.8%. In Australia, the S&P/ASX 200 was down around 1%.
This year’s Jackson Hole Economic Symposium is being held under the theme of “Structural Shifts in the Global Economy” and ends this weekend. In addition to Powell, dozens of other central bankers and academic figures attend the conference. European Central Bank President Christine Lagarde and Bank of Japan Governor Kazuo Ueda will also be on stage on Friday and Saturday.
Adding to general jitters before Powell’s speech on Friday were comment from Susan Collins, president of the Boston Fed, who said on Thursday that the Fed may need to continue raising rates. She said she was surprised by the US economy’s resilience and that the current inflation trajectory may not be sufficient to get rates back the Fed’s target of 2%.
Corporate news in focus: There is no major corporate news scheduled today.
Economic data in focus: Day 2 of central bank symposium in Jackson Hole, German gross domestic product (08:00 CET), Switzerland’s BFS Employment Barometer (09:00), Germany’s ifo Business Climate Index (10:00), University of Michigan Consumer Sentiment Index (16:00).
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Editor: Alessandro Fezzi
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Definition of rating categories of S&P and Moody’s which are relevant for us:
AAA/Aaa: Borrower with highest credit quality. Default risk also virtually negligible over the longer term
AA/Aa: Safe investment, default risk virtually negligible but more difficult to assess in the longer term
A: Safe investment as long as no unforeseen events impair the overall economy or sector
BBB/Baa: Average investment. However, problems must be expected if the overall economy deteriorates
BB/Ba: Speculative investment. Defaults must be expected if the economic situation deteriorates
B: Highly speculative investment. Defaults are likely if the economic situation deteriorates
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