By IFCMarkets
US stocks rebound on dovish Fed comments
US stocks rebounded on Monday after Federal Reserve Governor Lael Brainard called for continued ‘prudence’ in raising interest rates. The dollar weakened on Brainard’s dovish comments
The live dollar index data show the ICE US Dollar Index, a measure of the dollar’s value against a basket of six major currencies, declined 0.2% to 95.11. The Dow Jones industrial average gained 1.2% settling at 18298.00.45 led by Wal Mart and Procter & Gamble. The S&P 500 rallied 1.3% to 2156.00 led by utilities, telecom and consumer staples stocks. All ten main sector finished in positive territory. Dovish comments by Federal Reserve Governor Brainard, who is a voting member of Fed’s interest setting committee, alleviated concerns the central bank may hike rates at its September 20-21 policy meeting. The chances for a rate hike were seen to have increased after Boston Federal Reserve President Eric Rosengren said Friday a “reasonable case can be made” for raising interest rates. Brainard said Fed needs to be cautious about raising interest rates and avoid getting trapped in a low-growth, low-inflation environment. The comment by Brainard cautioning against monetary tightening too soon ahead of the blackout period that precedes the central bank’s September 20-21 policy meeting was followed by Minneapolis Fed President Neel Kashkari, who said there was no ‘huge urgency to do anything’. Market’s reaction was muted to the remark by Atlanta Fed President Dennis Lockhart, who said economic data over past weeks “warrant serious discussion of a policy rate increase.” The probability of a rate increase at Fed’s September meeting fell to 15% from a previous reading of 24% following Brainard’s comments, according to the CME’s Fed Watch tool. Today at 12:00 CET National Federation of Independent Business August Small Business Index will be released. The tentative outlook is positive for dollar. At 20:00 CET August Federal Budget will be published, the outlook is positive.
Rate hike expectations drive European stocks
European stocks closed lower on Monday on raised expectations of a US rate hike after hawkish comments by Fed policy makers last week. The euro ended little changed against the dollar while Pound strengthened.
The Stoxx Europe 600 closed 1% lower. Investors awaited to see whether Federal Reserve Governor Lael Brainard would change her dovish stance on monetary policy in her last speech before the Fed’s “quiet period” begins Tuesday, ahead of the central bank’s September 20-21 meeting. Germany’s DAX 30 lost 1.3% to 10431.77. France’s CAC 40 fell 1.2% and UK’s FTSE 100 slipped 1.1% to 6700.90. Today final reading of German headline inflation in August came in unchanged at 0.4%, indicating no change from previous month. At 10:30 CET August inflation will be released in UK, the outlook is positive for Pound. At 11:00 CET September ZEW Economic Sentiment will be published in euro-zone, the outlook is positive for euro.
Asian stocks are mixed as rate hike concerns ease
Asian stocks are mixed today after subsiding concerns about a rate hike at September Fed meeting. Hong Kong’s Hang Seng index is 0.26% lower after slumping more than 3% on Monday, while the Shanghai Composite Index is up 0.06% after better-than-expected industrial output and retail sales reports, with industrial production rising 6.3% in August, the fastest pace in five months. Australia’s All Ordinaries Index fell 0.17% as Australian dollar slipped. Nikkei ended 0.3% higher today at 16729.04 in thin trading with yen little changed against the dollar.
Oil futures prices are retreating on Tuesday
Oil futures prices are pulling back today after advancing on Monday on weaker dollar. A report on Monday by Organization of the Petroleum Exporting Countries forecasting higher non-OPEC crude production in the second half of this year contributed to the bearish mood. OPEC members are seen less likely to reach a deal at a meeting later this month to freeze output as they struggle to keep their market share. November Brent crude rose 0.8% to $48.41a barrel on London’s ICE Futures exchange on Monday.
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