Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Markets Keep Cherishing Positive Vibrations Ahead of Fed's Party in Jackson Hole

By Sergey LysakovStock MarketsAug 25, 2021 13:37
Markets Keep Cherishing Positive Vibrations Ahead of Fed's Party in Jackson Hole
By Sergey Lysakov   |  Aug 25, 2021 13:37
Saved. See Saved Items.
This article has already been saved in your Saved Items

The European markets continue to slowly and steadily climb higher , with the Euro Stoxx 50 major indicator adding just about 0.8% since the beginning of the week until noon on Wednesday. However, its increase is almost 2.5% if compared with the last local price bottom of August 19.
Frankly speaking, most of the EU stocks could perform even better if it were not for the German market which clearly underperformed today after today's contradictory release of the national business climate gauge regularly measured by the well-known Ifo Institute on a monthly basis. Unfortunately, it showed a moderate slide to 99.4 points in August which formally added more arguments for non-believers.
Of course, the mathematical fact that the Ifo business climate indicator formally dropped for a second straight month is not disputed. Moreover, the figure came below 100.4, which was expected by expert polls. Yet, most of the market seems to be more eager to continue to concentrate on a positive side of the phenomena as the decline is not so large vs the 101.7 points peak in June followed by 100.7 indication in July. The general point here is that even now the last three summer months put together claim to be the best period for the German economy since the very end of 2018, in terms of the Ifo climate index observations, at least.
Taking this important information into account, the decline of the German Xetra DAX 30 index ranged intraday within the 0.2-0.3% area, does not seem to be essential. The overall picture seems to be especially calm and quiet when the market sees that the absolute value of DAX Futures is located well above the 15,800 technical landmark, which is in turn less than 1.5% lower than the 16,030.33 high set on August 13. Apparently, all major European indices reserved a potential prospect of rewriting their top highs again, the markets may wait for the nearest favourable moment when proper conditions will coincide.
"Sentiment (is) positive but vulnerable to shifts ahead of the Jackson Hole conference which features Fed (the U.S. Federal Reserve) Chair Powell on Friday," Rob Carnell, a head of Asia research at ING remarked in a note. "Part of the sentiment improvement may lie with recent thoughts that this weekend's conference will not deliver any further insight into the timing of any Fed taper," he added.
Of course, any fresh signs by even one or two Fed governors concerning the hot topic of when tapering may begin – that is,  decreasing of the monthly volumes for the buying bonds program -  may carry with it new market risks. But, for example, a detailed interview with Dallas Federal Reserve President Robert Kaplan on Fox Business Network's "Mornings with Maria" last Friday gave markets hope for prolonged bond buying after his words created a feeling of  uncertainty about the Fed’s position on the subject during the Jackson Hole meeting and also how the central bank may also see the matter  at the very end of the Fed's decisive meeting on September 22.
The interview contained some sentences by Mr Kaplan, which indicated he may rethink his previous opinion on tapering and advice that it begin as early as October if the Delta variant threatens to slow the economy. He said the Delta variant has caused him to have an open mind about the path of monetary policy, while calling it “the big imponderable” in the outlook. “It is in all of our interest to slow the spread, and right now we’re in a negative trend... The thing that I am going to be watching very carefully over the next month, before the next [Fed's] meeting, is [whether] it is having a more material impact on slowing demand and slowing GDP growth. I’m going to keep an open mind on that, and if it is having a more negative effect that might cause me to adjust my views somewhat from ones that I’ve stated,” he remarked.
That immediately drove the market to more positive sentiment, even despite the fact that Robert Kaplan also said that so far the Delta variant was not having "a material effect" on consumer activity like dining out but "it is having an effect in delaying return to office, it's affecting the ability to hire workers because of fear of infection," and therefore it may later also affect production output.
In conclusion, Robert Kaplan rejected the Fed's Chairman Jerome Powell’s description of rising prices as “transitory", while adding that the Fed has yet to get a grasp on  the recent spike in inflation. He forecasted that inflation may subside to a 2.5% annual rate in 2022 only from a red-hot forecast of as much as 3.9% rate for 2021, noting the risks of higher inflation next year remain substantial. “What label do you put on that? I don’t know. I wouldn’t call it transitory. I just want to try to understand it and we don’t understand it yet,” he replied to one of the clarification-seeking questions.
In fact, all these remarks keep the call for an earlier start of tapering on the table, but collectively  all Robert Kaplan comments reflect the Fed's possible hidden intentions to be stalling as long as possible. The market still generally hopes the Jackson Hole event may be just one of the links in this chain of uncertainty, but not the last link certainly. The speeches of different members of the Fed's committee may demonstrate quite different positions. Meanwhile, this uncertainty is probably the best food for the stock market's bulls on both sides of the Atlantic, as the Fed's Dollar "printing press" is going to work almost as intensively as it is functioning right now, and until proven otherwise.
The U.S. S&P 500 broad market index still set its new all-time record on those expectations. Travel, energy, financial and retail sectors are among the leaders of the growth, and there is a high probability that the stock exchanges in Europe may mirror that kind of mood soon.

Markets Keep Cherishing Positive Vibrations Ahead of Fed's Party in Jackson Hole

Related Articles

Markets Keep Cherishing Positive Vibrations Ahead of Fed's Party in Jackson Hole

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email