European stock markets rise as traders look to the Fed
European stock markets have risen this morning as investors hope for dovish signals from the US Federal Reserve, which is due to release the minutes from its last meeting later today.
The Fed will also meet for its yearly symposium in Jackson Hole, Wyoming on Friday, where chair Jay Powell is expected to hint at a further interest rate cut.
Britain’s FTSE 100 had risen 1.1 per cent by 11.30am UK time, Germany’s Dax had climbed one per cent and France’s CAC 40 had rise 1.4 per cent.
Asian and US markets closed lower across the board, however, after US President Donald Trump told reporters yesterday that it was important to “take China on” even if it hurt the US in the short term.
The US central bank reduced its target rate by 25 basis points (0.25 percentage points) at the end of last month to between two and 2.25 per cent.
Trump and stock traders are united in their desire to see further cuts to boost markets amid uncertainty over trade. The latter group will parse the Fed’s minutes, due at 7pm, to see how dovish policymakers are feeling.
The July cut “was well telegraphed but any insight into the discussion behind the decision and in particular the reasons for the two dissenters to vote against it are key aspects to watch” in today’s minutes, said David Cheetham, chief market analyst at online trader XTB.
“With the release coming less than 48 hours before the eagerly anticipated Jackson Hole speech from chair Powell, the markets will no doubt be keenly attuned to any hints as to what the next likely step will be from the Fed.”
Craig Erlam, chief market analyst at foreign exchange firm Oanda, said: “Recession nerves look to have settled a little following last week’s panic” when government bond “yield curves” inverted, which is traditionally thought to foreshadow a contraction.
This “has brought some relief to markets,” Erlam said. “The Fed will be all too aware of the events of the last week, not just because of its historic significance, but because investors are now relying on them even more heavily to save the day.”