* A look at the day ahead from Deputy EMEA Markets Editor Sujata Rao. The views expressed are their own.
Aug 23 - Markets have waited all week for Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole, and today is the day - he speaks at 1400 GMT. World stocks are flat, albeit set for a weekly gain after three weeks of losses. Asian shares inched up and European markets are set to open higher. Currency markets remain focussed on the yuan, which slid as low as 7.0992 per dollar, its weakest since March 2008. That’s likely to stoke more tensions with Washington, which has already branded Beijing a currency manipulator. The yuan’s weakness, as everyone watches for the 7.10 level to be breached, is weighing on the rest of Asia. The Korean won was down 0.6% and the Indian rupee down 0.3% to its weakest since last December. Both countries might cut interest rates at their next central bank meeting to lift economies threatened by trade conflict, politics and export weakness. Chinese shares rose, however, lifted by comments from White House economics advisor Larry Kudlow that Sino-U.S. talks were still on track for September.
As for the Fed, its minutes released on Wednesday showed the central bank divided on whether more rate cuts were needed. This week, Fed officials Esther George, Eric Rosengren and Patrick Harker have expressed doubt that more cuts are needed. Money market expectations for rate cuts have not budged, but the dollar has inched higher on expectations that Powell might cast doubt on a prolonged rate cut cycle. The dollar is set for a second week of gains and U.S. 10-year yields are at a one-week high. The 2-10 yield curve continues to flirt with inversion. But since the Fed’s last meeting, the world economy has worsened and markets will be watching for any Powell comments on the new economic developments. Even in the United States, advance PMI readings this week showed manufacturing had contracted for the first time in a decade. Services remained buoyant most everywhere, but the surveys made for depressing reading. This morning’s Japanese data endorsed the trend - core consumer inflation was at a two-year low in July. As the trade war takes its toll, Japan’s exports slipped for an eighth month, their longest run of declines since 2016.
The pound has come off a three-week high of $1.2273 hit after traders interpreted comments from German Chancellor Angela Merkel to mean that a solution to the Irish border problem could be found before Britain leaves the European Union on Oct. 31. Now attention turns to British Prime Minister Boris Johnson’s G7 outing, which opens in Biarritz today. He is set to have lunch with U.S. President Donald Trump on Sunday.
European stock futures are flying high, clinging to hopes for a resoundingly dovish speech from Powell. Eurostoxx futures are up 0.8% and London stock futures up 0.7%, recovering from yesterday's sell-off. Investors reacted to everything from fiscal stimulus and Brexit to Italy's political tumult, but the pan-European market is on track for its best week in two months. Both the European benchmark and its euro zone counterpart, however, are heading for a 3% drop for August, only its second monthly drop this year.
Everyone loves Peppa Pig. So news that the owner of the cartoon series will be sold to Hasbros for $4 billion in cash has caught attention. That’s a 26% premium to yesterday's closing price, and Entertainment One shares are expected to rally. For Hasbros, it’s a major step towards gaining access to the lucrative infant and preschool market.
Shares in Kloeckner & Co are soaring 18.8% in premarket trading after a newspaper reported Thyssenkrupp was in talks to buy the metals distributor to strengthen its materials trading business, citing sources familiar with the matter. Thyssenkrupp, which had its best day in months yesterday, is up 2.2%, making the stock the biggest gainer in the country's DAX top-30 index. The report is giving other steel stocks a lift - Salzgitter shares are up 3% in premarket trade.
A largely negative note from BAML on the European auto sector, including Daimler, Volkswagen, Continental and Pirelli, is likely to weigh on the battered industry.
Emerging-market shares were 0.2% higher as Shanghai blue chips gained 0.8% after Kudlow’s comments on trade. That also helped support Hong Kong shares, which were 0.6% higher before further anti-government protests planned for this weekend.
In currencies, South Africa's rand was 0.3% higher, still supported by a lower-than-expected local inflation reading earlier this week. Turkey's lira is flat. The rouble should gain strength from higher oil prices. Pressured by the yuan's decline and deteriorating ties with Japan, the Korean won slipped as much as 0.6%. The Indian rupee lost 0.3% to reach its weakest level against the dollar since December 2018.
S&P Global might downgrade Lebanon's sovereign rating in a report on Friday, although local reports suggest the country may get a six-month "grace period."
Argentine presidential candidate Alberto Fernandez said on Thursday there was "no possibility" the country would default on debt SCHEDULED EVENTS AND DATA Japan July inflation Europe corp events: Simcorp, Kingspan Belgium Aug leading indicators Nigeria Q2 GDP US July new home sales Fed’s annual Jackson Hole conference; speech by Fed chair Powell Canada June retail sales Mexico Q2 GDP, current account Sovereign credit rating reviews – S&PGlobal reviews Lebanon, Sweden, Lithuania, Iraq, Zambia, Switzerland, Tajikistan. Moody’s reviews Greece, Lithuania; Fitch reviews Bulgaria. (Editing by Larry King)