European stock indices closed higher on the day, with France's CAC 40 leading the region at +0.98%. Fed Chair Kevin Warsh struck a hawkish tone at Jackson Hole, pushing Treasury yields higher and leaving Wall Street mixed. The remarks lifted the odds of a September rate hike to near 59%.
London and European traders headed for the exits with indices closing higher, led by France's CAC 40, which rose 0.98%. That gain halved the CAC's weekly decline, since the index had closed down 0.98% for the week.
European gains broad but mixed for the week
Germany's DAX rose 0.81% on the day, alongside gains of 0.29% for the UK's FTSE 100, 0.81% for Spain's Ibex, 0.67% for Italy's FTSE MIB and 0.77% for the Euro Stoxx 50. For the week, however, the major indices finished mixed: the DAX gained 1.66%, the FTSE 100 added 0.07% and Spain's Ibex rose 0.40%, while the CAC 40 fell 0.98% and Italy's FTSE MIB slipped 0.10%.
European bond yields moved higher too. Germany's 10-year yield rose to 3.280%, up 1.3 basis points, while France's climbed to 4.127%, up 2.9 basis points, with the UK, Spain and Italy also higher across the curve.
Warsh's hawkish Jackson Hole tone drives yields
Fed Chair Kevin Warsh gave no explicit guidance on the next rate decision but made clear that inflation remains the Fed's predominant concern. He described the economy as resilient, citing solid consumer spending, strong AI-related business investment and historically low unemployment. Warsh said the Fed must see inflation moving toward its 2% objective clearly and at an adequate pace, a comment that has pushed expectations for a September rate hike to near 59%.
As a result, Treasury yields moved higher across the curve, with the 2-year rising to 4.3289%, up 9.7 basis points, and the 10-year climbing to 4.712%, up 4.0 basis points. The larger rise at the front end is flattening the yield curve, reflecting a more hawkish reassessment of near-term Fed policy.
Wall Street mixed as rate-sensitive stocks lag
US stocks are trading mixed following the speech. The Dow Jones rose 115.01 points, or 0.21%, to 53,689.36, while the S&P 500 was virtually unchanged at -0.00%. The Nasdaq Composite fell 0.21%, and the Russell 2000 dropped 1.03%, underperforming as small-cap and technology shares stay more sensitive to higher borrowing costs.
The Dow is holding up even as technology shares and small caps lag, but the broader market takeaway is that Warsh has set a high bar for easing. Inflation must show clearer, more sustained progress before the Fed is likely to consider lowering rates.
Source: Investinglive
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