On Monday the US stock market powered to a new high, setting the tone for a positive start to global equities trading in the week of the Jackson Hole meeting of monetary policymakers.
The S&P 500 posted an intraday record of 3,427 and was trading up 0.7 per cent at late morning in New York, with tech titans again lifting the index. Apple, the world’s largest company set a new record of its own at $515 a share, before paring gains to trade 1 per cent higher on the day.
“Big cap tech continues to ride the wave of euphoria and momentum while most other areas of the market that have lagged are more worried about the macroeconomic environment,” said Peter Boockvar at Bleakley Advisory Group. “We need the latter to reverse in order to maintain the former.”
He added: “I certainly can’t give you a good fundamental reason for the rally because I can’t find one.” The technology-heavy Nasdaq Composite index was 0.4 per cent higher. The broader-based S&P 500 has notched a four-week advance that has wiped out the remainder of the steep loss caused by the coronavirus crisis, having soared 55 per cent from the low it hit in March.
European equities gained strength from the buoyant mood in the US and Asia. The Stoxx 600 stepped up its pace to add 1.5 per cent in early afternoon trade on Monday, with equities advancing in Frankfurt, Paris and London. The regional benchmark is 14 per cent off its high for the year, struck in February.
Traders looked beyond the rising coronavirus caseload in Europe, which has unsettled some regional governments, and instead focused on signs of progress on developing a vaccine.
The Trump administration is considering bypassing US regulatory standards to fast-track an experimental vaccine being developed in the UK by Oxford university and AstraZeneca before the November general election, the Financial Times reported at the weekend.
The US has also just given emergency authorisation for the use of plasma from recovered patients to treat some people currently in hospital. Market participants said, in addition to Covid-19 developments, they would be paying close attention to the Kansas City Fed’s virtual Jackson Hole summit. Economists are expecting Jay Powell, the central bank chair, to unveil details of the Federal Reserve’s wide-ranging review of monetary policy.
“Indications that the Fed might adopt a so-called flexible average inflation-targeting approach could lead yields and rates of market-based inflation compensation slightly higher, while keeping a lid on real rates,” UniCredit analysts said in a note.
Minutes from the Fed’s July meeting released last week briefly weighed on market sentiment after the central bank threw cold water on the idea that it might soon consider taking measures aimed at capping longer-term government bond yields.