European stock markets fell slightly in early trading on Thursday, hovering just below recent highs, as traders avoided making big moves and waited for the Federal Reserve’s three-day annual Jackson Hole symposium.
Jackson Hole starts on Thursday and focus will be on Fed Chair Jerome Powell’s speech on Friday, which could move markets as traders look for hints about the likelihood of a September rate cut.
“People are sitting on their hands. You have a couple of big known unknowns coming, with Jackson Hole tomorrow and the Fed in September,” said Tim Graf, head of macro strategy for EMEA at State Street Markets.
“This is the time to send the message, if you’re going to ease, that it’s coming,” he said. “But I can also see them saying, we don’t know the full effect of tariffs and inflation pressure is still not quite out of the economy and being a bit more balanced.” Traders had ramped up bets for a September cut following a surprisingly weak payrolls report at the start of this month, and were further encouraged after consumer price data showed limited upward pressure from tariffs. But they lowered their expectations slightly following the release of minutes from the Fed’s July meeting. Stock markets stayed near recent highs during Asian trading, and Australia’s benchmark hit a new record.
At 0946 GMT, the pan-European STOXX 600 was down by 0.2%, just below the five-month high it hit in the previous session . London’s FTSE 100 was down 0.1%, Germany’s DAX was down 0.1% and France’s CAC 40 was down 0.4%.
The MSCI World Equity Index was down 0.1% on the day .
U.S. stock futures were mixed, with Nasdaq e-minis steady but S&P 500 e-minis down by 0.1% . A U.S. tech selloff had continued for a second day on Wednesday, in a move analysts attributed to concerns about high valuations, profit-taking and risk aversion. Euro zone business activity accelerated in August, PMI data showed, with Germany registering its fastest growth since March and France’s downturn easing.
Euro zone bond yields were mostly higher, with the benchmark 10-year German Bund at 2.7374%.
The 10-year U.S. Treasury yield was at 4.3101%. The U.S. dollar index was up 0.2% on the day at 98.225, and the euro was steady at $1.1653. U.S. President Donald Trump intensified his effort to influence the Federal Reserve on Wednesday, calling on Federal Reserve Governor Lisa Cook to resign on the basis of allegations made by one of his political allies about mortgages she holds in Michigan and Georgia. Cook said she had “no intention of being bullied to step down” from her position at the central bank.
Deutsche Bank analysts in a research note attributed a rise in gold overnight to renewed concerns about the Fed’s independence.
“The news was a reminder of the lingering concerns over future Fed independence and risks of fiscal dominance, though the extent of the market reaction was fairly modest,” Deutsche Bank said.
State Street Markets’ Tim Graf said that although central bank independence is considered “sacrosanct” by markets, it was not yet problematic.
“Markets quite rightly look through this, price maybe a little bit of risk premium for sure, but it’s not something that I think really upsets the apple cart too much,” he said.
Gold prices edged lower on Thursday, at $3340.61 per ounce.
Oil prices rose, bolstered by signs of strong demand in the U.S..
(Reporting by Elizabeth Howcroft in Paris; Editing by Toby Chopra)
