Stocks extend gains before key US data

LONDON (AFP): Stock markets extended a global rally Tuesday ahead of US data this week that could be key to the Federal Reserve’s decision-making on interest rates.

Wall Street stocks opened flat but quickly pushed higher, with the first in a series of data due out this week scheduled for release later in the day.

In Europe, Paris and Frankfurt posted modest gains, while London’s FTSE 100 index jumped 1.7 percent, catching up with strong eurozone gains on Monday when trading in Britain paused for a public holiday. In Asia, Hong Kong and Shanghai enjoyed big gains following fresh promises of help for China’s economy but worries about the outlook continue to dampen sentiment, with authorities facing growing calls for bigger stimulus to revive growth.

Gas prices climbed on supply concerns caused by a looming production strike in Australia, and oil futures also rose.

The yen remained weighed down by the Bank of Japan’s refusal to move away from its ultra-loose monetary policy, which has seen it rule out interest-rate hikes despite high inflation. The dollar also rose against the euro and pound.

Goldman Sachs strategists warned that if the BoJ sticks to its guns, then the yen could fall to around 155 per dollar over the next six months, the weakest level since 1990.

After a mainly painful August across trading floors, equities had enjoyed a positive start to the week after Fed boss Jerome Powell’s insistence that monetary policy would be based on a range of indicators fuelled hope the rate-tightening cycle has drawn to a close.

This week sees the release of the US central bank’s preferred gauge of inflation, the personal consumption expenditures (PCE) price index, as well as factory activity.
July jobs creation and August consumer confidence data come out later Tuesday.

“Focus is on US jobs and inflation data out this week for clues into the resilience of the US economy as well as the Fed’s next move,” noted Victoria Scholar, head of investment at Interactive Investor.

While inflation is easing, Fed officials have warned it remains too high at 3.2 percent — and that borrowing costs might have to rise or at least remain elevated until they are satisfied prices have been tamed.

That, however, has led to concerns that they could deal a blow to the economy.
“Investors want to see economic releases this week that suggest activity is slowing enough to keep further rate hikes at bay, but not too slow to indicate the economy is headed for a recession,” said Anthony Saglimbene at Ameriprise.

Swissquote Bank analyst Ipek Ozkardeskaya said the jobs data is expected to come in at below 10 million job openings.

“A number lower than expectations would point to loosening jobs market and could soften the hawkish Federal Reserve expectations,” she said, but a stronger figure would boost the hand of policymakers who see a further increase in rates is needed.
Meanwhile, shares in 3M rose by 2.4 percent, having surged already on Monday, as the company confirmed it has reached a $6 billion settlement over claims by US military veterans that earplugs it manufactured were faulty and failed to protect their hearing.