Volkswacht Bodensee - European stocks rise as Powell speech looms

Markets have seesawed in recent days as investors position themselves ahead of speeches by Powell and other central bankers at an annual symposium in Jackson Hole, Wyoming, in which they may indicate whether more interest rate hikes are needed to tame inflation.

"Heading into the Jackson Hole Fed event, the market might be leaning excessively towards a dovish outlook, evident in its mere 16 percent probability of a rate hike," said SPI Asset Management's Stephen Innes.

A dovish stance would be indications that no or fewer rate hikes are necessary and that they may begin coming down soon. A hawkish stance would be that interest rates need to rise further to bring inflation down.

But on currency markets the dollar rose, although analysts put this down to differing economic performance expectations as well as Powell's speech.

"The US dollar has been benefitting in the near-term from heightened investor concerns over growth outside of the US especially in China and Europe while the US economy is proving more resilient than expected so far this year," said analyst Lee Hardman at MUFG bank.

The Fed and other central banks have been hiking interest rates last year to rein in a surge inflation as the world economy recovered from pandemic closures and then Russia's invasion of Ukraine. The higher cost of borrowing has largely choked off growth in Europe although the US economy is proving more resilient.

A recent switch to a more "data-dependent" approach to further rate hikes given progress in reducing inflation has seen traders react to most economic indicators in a "good news is bad news" fashion, with healthy data seen as likely pressuring officials to hike interest rates further to temper inflation.

A string of positive readings on the economy and jobs have weighed on equities this month, while policymakers appear split on the best way forward as they try to tame prices while looking to avoid causing a recession.

Boston Fed boss Susan Collins told Yahoo! Finance she thought more increases were needed, while Philadelphia Fed head Patrick Harker thought they should stay where they are -- at a two-decade high -- telling CNBC that "we've probably done enough".

Analysts said Powell must tread a fine line in his speech. A hawkish speech at last year's Jackson Hole gathering sent shivers through world markets.

"Expect a balanced assessment with no abrupt hawkishness, but no 'Mission Accomplished'," said Krishna Guha, vice chairman at Evercore investment bank.

"The Fed has not come this far to let inflation slip out of its grasp."

Michael Hewson at CMC Markets UK said Powell would unlikely deliver a dovish message.

"As we already know from recent comments from various Fed officials it is clear the Fed believes the fight against inflation is far from over, and in that context it’s unlikely he will deliver any dovish surprises."

European Central Bank head Christine Lagarde is also due to speak later in the day, with a string of poor economic data boosting expectations that it could pause its rate hikes.

- Key figures around 1015 GMT -

London - FTSE 100: UP 0.5 percent at 7,366.96 points

Frankfurt - DAX: UP 0.5 percent at 15,692.62

Paris - CAC 40: UP 0.7 percent at 7,263.34

EURO STOXX 50: UP 0.6 percent at 4,257.99

Tokyo - Nikkei 225: DOWN 2.1 percent at 31,624.28 (close)

Hong Kong - Hang Seng Index: DOWN 1.4 percent at 17,956.38 (close)

Shanghai - Composite: DOWN 0.6 percent at 3,064.07 (close)

New York - Dow: DOWN 1.1 percent at 34,099.42 (close)

Euro/dollar: DOWN at $1.0800 from $1.0811 on Thursday

Pound/dollar: DOWN at $1.2588 from $1.2596

Euro/pound: DOWN at 85.75 pence from 85.81 pence

Dollar/yen: UP at 146.11 from 145.80 yen

West Texas Intermediate: UP 1.2 percent at $80.03 per barrel

Brent North Sea crude: UP 1.3 percent at $84.44 per barrel

-- Bloomberg News contributed to this story --

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C.Kovalenko--BTB