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* Eyes on Fed minutes, Jackson Hole meeting for rate outlook
* Italy stocks lead European rally
* Germany's borrowing costs higher before bond sale
* U.S. President Trump says he had to 'take China on'
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
By Tom Arnold
LONDON, Aug 21 (Reuters) - European stocks opened higher on
Wednesday as hopes for more monetary and fiscal stimulus helped
assuage worries about global recession, political turmoil in
Italy and endless trade wars.
Traders are waiting for the Federal Reserve's annual Jackson
Hole symposium later this week and a Group of Seven summit this
weekend for clues on what steps policymakers will take to boost
economic growth.
Much depends on what the Fed does with U.S. interest rates,
making markets hyper-sensitive to the minutes - due later on
Wednesday - of its last meeting.
"People are looking ahead to Jackson Hole later this week
and the message that [Fed Chairman] Jerome Powell may or may not
give us on the direction of monetary policy. That is the
highlight of the week and we are waiting with bated breath,"
said Andrew Milligan, head of global strategy at Aberdeen
Standard Investments.
Futures 0#FF: are fully priced for a quarter-point cut in
rates next month and cuts of more than 100 basis points by the
end of next year. FEDWATCH
Morgan Stanley (NYSE:MS) economist Ellen Zentner advised clients to
watch for the use of the word "somewhat" when Powell describes
future policy.
"Acknowledgment that downside risks have increased with no
characterisation of 'somewhat' could be taken as confirmation
that it is likely the Fed makes a larger cut in September,"
Zentner wrote in a note.
With so much riding on the Fed, investors were cautious and
volumes subdued. The Euro STOXX 600 .STOXX was 0.6% higher,
with Italy .FTMIB outperforming after a rout yesterday
following the resignation of Italian Prime Minister Giuseppe
Conte. Shares in Milan-listed Fiat Chrysler FCHA.MI climbed 3.1%
after Italian media reported that talks between Fiat and Renault
RENA.PA never stopped. That put the STOXX 600 Autos Index
.SXAP on track for its best day in a month.
GEA Group G1AG.DE , a German food-processing-machinery
company, and outsourcing group Capita CPI.L gained more than
5% after Goldman Sachs (NYSE:GS) upgraded its rating on the stocks.
President Donald Trump showed no signs of backing down in
his tussle with China, declaring on Tuesday a confrontation was
necessary even if it hurt the U.S. economy in the short term.
Shortly afterward, the U.S. government approved an $8
billion sale of Lockheed Martin (NYSE:LMT) LMT.N F-16 fighter jets to
Taiwan, a move sure to draw Beijing's ire and further dim
prospects for a trade deal.
Political turmoil in Italy, Britain and Hong Kong has also
heightened uncertainties.
Italian bond yields steadied after falling on Tuesday, as
Italian President Sergio Mattarella begins two days of talks
that will lead either to formation of the country's 67th
government since World War Two or to early elections.
Germany bond yields rose before the sale of new 30-year
government bonds that could test investor demand for deeply
negative bond yields. Germany plans to sell 2 billion euros of
the new bond, with a 0% coupon STIMULUS
Alarm bells started ringing last week when yields on U.S.
10-year notes fell below two-year yields for the first time
since 2007, an inversion that has preceded previous recessions.
That was enough to prompt Trump's administration to look for
ways to stimulate the U.S. economy In addition, the central banks of the euro zone, Australia
and China are all expected loosen monetary policy some more
this year. Germany is considering fiscal stimulus.
Those prospects have driven yields lower. Benchmark U.S.
10-year Treasury yields US10YT=RR stood at 1.57% on Wednesday,
down from a high of 1.625% on Monday.
Currency markets were mostly subdued. The euro struggled was
last down 0.1% at $1.1092 EUR=EBS . The dollar, measured
against a basket of currencies, rose 0.1% to 98.265 .DXY .
Sterling was down 0.3% at $1.2134 GBP=D3 and 0.2% against
the euro at 91.405 pence EURGBP=D3 .
In commodities markets, U.S. crude CLc1 rose 17 cents to
$56.30 per barrel. Brent LCOc1 added 23 cents to $60.26.
Spot gold XAU= was weaker at $1,498.15 an ounce.