Stocks Rise in Run-Up to Jackson Hole Speeches

By Riva Gold and Lucy Craymer Features Dow Jones Newswires

Yellen, Draghi in the spotlight

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-- Best day for Shanghai stocks in a year

-- Samsung shares drag on Korea's Kospi

Stocks around the world moved higher Friday ahead of an update from central bankers, keeping most bourses on track for weekly gains.

Futures pointed to a 0.3% rise for the S&P 500 after Shanghai stocks closed out their best day in a year.

The Stoxx Europe 600 edged up 0.3% in afternoon trading as a climb in the banking, auto and mining sectors offset losses in shares of retailers. Shares of Provident Financial were up 21%, but remained down nearly 52% this week following a profit warning and the resignation of its chief executive on Tuesday.

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The moves came ahead of speeches later in the day from the heads of the Federal Reserve and European Central Bank at the annual Jackson Hole gathering of central bankers. Fed Chairwoman Janet Yellen will deliver a speech on financial stability and ECB President Mario Draghi will hold a luncheon address a few hours later.

While no major policy announcements are anticipated by investors and implied volatility in markets is fairly low, most will be watching their comments closely.

"We expect that the ECB will remain accommodative, and [Mr. Draghi] has to say that to limit the upside on the euro and limit the risk on economic growth," said Philippe Waechter, chief economist at Natixis Asset Management. Should Mr. Draghi not say anything to that effect, the market could take that as a cue to keep buying the euro, he said.

The euro was last up 0.2% the dollar at $1.1823 after climbing around 12% this year as political risks have cleared just as the eurozone economy has strengthened.

That has put pressure on shares of the region's exporters. Flows to European equity funds have declined for four straight weeks and just recorded their first outflow since early July, according to EPFR Global.

"If the euro continues to accelerate at the same pace, it's going to be difficult for European companies to see such strong growth in their earnings," said Holly MacDonald, chief investment strategist at Bessemer Trust.

The dollar, meanwhile, has weakened around 7% against a basket of 16 currencies, in part due to fading hopes for fiscal stimulus and expectations that interest rates will rise only gradually in the U.S.

Investors currently price just a 40% chance of a rate rise in the U.S. by the end of the year, according to Fed-fund futures tracked by CME Group, and a 38% chance that rates will be unchanged in August 2018, well below the Fed's official projections.

Ms. MacDonald at Bessemer Trust said she thinks there might be room for more of a hawkish surprise from the Fed this weekend, in light of current market pricing.

"Given that inflation has been so low, it is reasonable to expect the Fed will be very measured," she said. But most readings suggest the economy is in good shape, and there is a chance Ms. Yellen could discuss current financial conditions, implying higher rates, she said.

Yields on 10-year German government bonds rose to 0.398% from 0.378% Thursday, but Treasurys were steady at 2.196% from 2.194%. Yields move inversely to prices.

Earlier, Asian stocks picked up momentum after a muted start to Friday's trading.

Chinese equities led the way as shares rebounded on gains in the banking sector ahead of first-half reports. The Shanghai Composite was up 1.8% in its best day of the year, with Industrial & Commercial Bank of China hitting a nine-year high ahead of its earnings release on Wednesday.

Hong Kong's Hang Seng Index climbed 1.2%, helped by better-than-expected results from oil company Cnooc.

Japan's Nikkei rose 0.5% as the dollar strengthened against the yen, with Yamaha Motor Co., Toyota Motor Co. and Sony Corp. all rising close to 1%. Still, the Nikkei logged a sixth straight weekly drop despite gains overseas, its longest losing streak since the start of 2014.

Gains in South Korea's Kospi were muted with the overall index up just 0.1% as shares of Samsung Electronics Co. fell 1.1%. Samsung's de facto leader, Lee Jae-yong, was found guilty of bribing South Korea's president and sentenced to five years in prison on Friday. Portions of the decision came just as trading ended for the week.

In commodities, Brent crude oil rose 0.7% to $52.04 a barrel, partially reversing Thursday's declines as the market watched the progress of Hurricane Harvey toward Texas. Crude fell Thursday on worries that refiners' near-term usage of oil in the region will fall faster than offshore production, said investment bank OCBC.

Kevin Kingsbury

contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Lucy Craymer at Lucy.Craymer@wsj.com

-- Yellen, Draghi in the spotlight

-- Best day for Shanghai stocks in a year

-- Samsung shares drag on Korea's Kospi

Stocks around the world moved higher Friday ahead of an update from central bankers, keeping most bourses on track for weekly gains.

Futures pointed to a 0.2% rise for the S&P 500 after Shanghai stocks closed out their best day in a year.

The Stoxx Europe 600 edged up 0.3% as a climb in the banking, auto and mining sectors offset losses in shares of retailers. Shares of Provident Financial gained 21%, but remained down nearly 52% this week following a profit warning and the resignation of its chief executive on Tuesday.

The moves came ahead of speeches later in the day from the heads of the Federal Reserve and European Central Bank at the annual Jackson Hole gathering of central bankers. Fed Chairwoman Janet Yellen will deliver a speech on financial stability and ECB President Mario Draghi will hold a luncheon address a few hours later.

While no major policy announcements are anticipated by investors and implied volatility in markets is fairly low, most will be watching their comments closely.

"We expect that the ECB will remain accommodative, and [Mr. Draghi] has to say that to limit the upside on the euro and limit the risk on economic growth," said Philippe Waechter, chief economist at Natixis Asset Management. Should Mr. Draghi not say anything to that effect, the market could take that as a cue to keep buying the euro, he said.

The euro was last up 0.2% the dollar at $1.1823 after climbing around 12% this year as political risks have cleared just as the eurozone economy has strengthened.

That has put pressure on shares of the region's exporters. Flows to European equity funds have declined for four straight weeks and just recorded their first outflow since early July, according to EPFR Global.

"If the euro continues to accelerate at the same pace, it's going to be difficult for European companies to see such strong growth in their earnings," said Holly MacDonald, chief investment strategist at Bessemer Trust.

The dollar, meanwhile, has weakened around 7% against a basket of 16 currencies, in part due to fading hopes for fiscal stimulus and expectations that interest rates will rise only gradually in the U.S.

Investors currently price just a 40% chance of a rate rise in the U.S. by the end of the year, according to Fed-fund futures tracked by CME Group, and a 38% chance that rates will be unchanged in August 2018, well below the Fed's official projections.

Ms. MacDonald at Bessemer Trust said she thinks there might be room for more of a hawkish surprise from the Fed this weekend, in light of current market pricing.

"Given that inflation has been so low, it is reasonable to expect the Fed will be very measured," she said. But most readings suggest the economy is in good shape, and there is a chance Ms. Yellen could discuss current financial conditions, implying higher rates, she said.

Yields on 10-year German government bonds rose to 0.398% from 0.378% Thursday, but Treasurys were steady at 2.196% from 2.194%. Yields move inversely to prices.

Earlier, Asian stocks picked up momentum after a muted start to Friday's trading.

Chinese equities led the way as shares rebounded on gains in the banking sector ahead of first-half reports. The Shanghai Composite was up 1.8% in its best day of the year, with Industrial & Commercial Bank of China hitting a nine-year high ahead of its earnings release on Wednesday.

Hong Kong's Hang Seng Index climbed 1.2%, helped by better-than-expected results from oil company Cnooc.

Japan's Nikkei rose 0.5% as the dollar strengthened against the yen, with Yamaha Motor Co., Toyota Motor Co. and Sony Corp. all rising close to 1%. Still, the Nikkei logged a sixth straight weekly drop despite gains overseas, its longest losing streak since the start of 2014.

Gains in South Korea's Kospi were muted with the overall index up just 0.1% as shares of Samsung Electronics Co. fell 1.1%. Samsung's de facto leader, Lee Jae-yong, was found guilty of bribing South Korea's president and sentenced to five years in prison on Friday. Portions of the decision came just as trading ended for the week.

In commodities, Brent crude oil rose 0.7% to $52.04 a barrel, partially reversing Thursday's declines as the market watched the progress of Hurricane Harvey toward Texas. Crude fell Thursday on worries that refiners' near-term usage of oil in the region will fall faster than offshore production, said investment bank OCBC.

Kevin Kingsbury

contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Lucy Craymer at Lucy.Craymer@wsj.com

(END) Dow Jones Newswires

August 25, 2017 09:25 ET (13:25 GMT)