* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Ritvik Carvalho
LONDON, Aug 23 (Reuters) - World stock markets and the
dollar rose on Friday as investors looked to a speech by Federal
Reserve chair Jerome Powell for clarification on whether the
U.S. central bank remains on course to deliver another interest
rate cut in next month.
Suggesting markets remain broadly confident of further Fed
stimulus, European stocks rebounded from the previous day's
falls, with the pan-European STOXX 600 .STOXX index up as much
as half a percent by midday in London. Britain's FTSE 100 index
.FTSE was up 0.71%. .EU
MSCI's All Country World Index .MIWD00000PUS , which tracks
shares across 47 countries, was up 0.1% and set to break a
three-week losing streak.
Earlier in Asia, MSCI's broadest index of Asia-Pacific
shares outside Japan .MIAPJ0000PUS edged 0.4% higher and was
up 1.0% for the week, on track to break a four-week losing
streak. Japan's benchmark Nikkei .N225 advanced 0.4% and
Australian stocks .AXJO added 0.3%.
The dollar rose 0.3% against a basket of peer currencies.
Powell is due to speak at 1400 GMT at a gathering of central
bankers in Jackson Hole, Wyoming.
While markets overwhelmingly expect the Fed to follow up its
first rate cut in a decade with more stimulus at its meeting
next month, some policymakers are not keen.
Kansas City Fed President Esther George, who dissented
against the decision to ease in July - for the first time since
the financial crisis - and Philadelphia Fed President Patrick
Harker, who said he "reluctantly" supported the cut, both said
the U.S. economy did not need more stimulus at this point.
Dallas Fed President Robert Kaplan said businesses had
become much more cautious due to surprises on trade policy and
he was "going to at least be open-minded about making some
adjustment" if he saw continued weakness.
That has made Powell's speech pivotal for markets as they
look for any clues on future policy direction.
"Judging by the minutes from the July meeting the central
bank seems content to sit on their hands, but it is worth
remembering the U.S.-China trade situation has intensified, and
so has the unrest in Hong Kong, and that might prompt Mr. Powell
to be a touch more dovish than he was in late July," said David
Madden, markets analyst at CMC Markets in London.
U.S. stock futures were up 0.26%, pointing to gains on Wall
Street later in the day. ESc1 .N
In the U.S. bond market, the two-year/10-year yield curve
briefly moved back into inversion territory overnight, a shift
that also occurred last week and hit financial markets amid
worries that it presaged a sharp global downturn. US2US10=RR
"There's been no jaw-dropping news this week but we have had
incrementally less bond-friendly news - the FOMC minutes, the
euro area PMIs, and Fed speakers in recent days that give the
impression that July was an insurance rate cut," said John
Davies, G10 rates strategist at Standard Chartered (LON:STAN) Bank.
"This has dragged the market away from speculating about
25-50 basis points rate cut in September to a discussion on a 25
bps cut to will they cut rates, so a bit more uncertainty has
been injected into markets."
Markets are however still pricing in a 98.8% probability of
a 25-basis-point cut on Sept. 18. IRPR
The euro eased marginally to $1.1053 EUR=D4 . A survey
showing a surprise uptick in euro zone business growth for
August was offset by trade war fears, knocking future
expectations to their weakest in over six years. The pound GBP=D4 fell 0.4% to $1.2215 as investors
reassessed whether British Prime Minister Boris Johnson had made
any progress in convincing the European Union to renegotiate the
Brexit agreement.
German Chancellor Angela Merkel's comments on Thursday that
a solution to the Irish border question could be found before
Oct. 31, the deadline for Britain to leave the EU, triggered the
biggest one-day gain in the pound against the dollar since May.
Against the euro, sterling gained the most in five months.
China's yuan recovered some ground to trade flat after
hitting an 11-1/2 year low.
Spot yuan CNY=CFXS slid to as low as 7.0992 per dollar,
its weakest since March 2008. China's central bank set the
midpoint rate at 7.0572, its weakest level in 11-1/2 years but
much stronger than traders had expected. Washington labelled China a currency manipulator this month
after a sharp slide in the yuan. Concern about China's economy
is growing because U.S. tariffs on roughly $150 billion of
Chinese goods will take effect from Sept. 1. Oil prices steadied, on track for a weekly gain. Brent crude
oil was flat at $59.90 per barrel, while U.S. crude futures were
marginally higher at $55.42 per barrel. O/R
Gold eased and was set for its worst week in nearly five
months. Spot gold XAU= was down 0.2% at $1,495.14 an ounce.