European futures flying ahead of quiet session

• Central banks dominate proceedings this week;

• Yellen’s Jackson Hole key note speech may headline important week;

• Minutes from Fed and BoE, released Wednesday, another major event this week;

• European futures flying ahead of quiet session.

What could shape up to be a rather important week for the markets is set to get off to a quieter start on Monday. A lack of economic data is forcing investors to focus on the major events coming later in the week, particularly the release of the minutes from the Bank of England and Federal Reserve meetings, and the Jackson Hole symposium which will host Fed Chair Janet Yellen on Thursday and ECB President Mario Draghi on Friday.

While it’s difficult to pick a standout event from these, as all have great potential to create major waves in the markets, I would say Yellen’s key note speech on Thursday just about takes it. Despite its apparent openness, it feels like the Fed has chosen to keep its cards very close to its chest in recent months, as no central bank that is seeing such a strong recovery can possibly be as dovish on rates as the Fed is making out.

Yellen’s predecessor, Ben Bernanke, previously used his key note speech to hint at upcoming changes in monetary policy stance. While that doesn’t mean that Yellen will do the same, especially given that this year’s event is focused on the labour market, I would certainly not bet against it and I’m sure not many would which is why the markets will be very keen to hear what she has to say on Thursday. The timing of the first rate hike still appears to be priced in for the middle of next year, so I think any change in stance from Yellen will only be to bring that forward by a few months. She is clearly very cautious when it comes to this recovery and is unwilling to rush it and threaten to choke it off before it really gets going.

One thing I would say in relation to this though is that any change in policy that has been mentioned at previous events has been rumoured at ahead of the event. We haven’t heard anything on this occasion which may strongly suggest that Yellen is going to stick to the topic of the day and use the opportunity to drive home how much slack remains in the labour market, thereby delivering yet another very dovish speech.

With this in mind, the key event this week could turn out to be the release of the Fed minutes on Wednesday. Yellen may not be ready to contemplate rate hikes at this stage but the closer we get to the first one, the more chance we have of seeing dissenters among the policy makers which makes the voting far more interesting. The same goes for the BoE, where I expect the first vote in favour of a rate hike to be just around the corner, albeit probably note this week.

As mentioned earlier, there’s very little on offer from the economic calendar, with the only notable release being the Eurozone trade balance number. That isn’t stopping Europe getting off to a great start though, with the DAX seen opening more than 1% higher, while its other European counterparts are too far behind. Clearly these indices aren’t taking a lead from Asia overnight, where stocks traded relatively mixed following a similar session in the US on Friday.

Ahead of the open, the FTSE is seen 32 points higher, the CAC 35 points higher and the DAX 105 points higher.