US stocks rose, halting the longest slide since June, as an increase in consumer spending last month bolstered confidence in the economy and a drop in Treasury yields sparked demand for equities with rates of dividend payouts.
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“Sentiment towards the USA economy was elevated on Friday following the hawkish comments from Janet Yellen which bolstered expectations over the Federal Reserve raising U.S. rates in 2016”, FXTM research analyst Lukman Otunuga in an investors’ note. This is due to investoes scaling back expectations of increases in the Fed rate.
Shares in Hong Kong, where monetary policy is linked to that of the United States, fell 0.4 percent, while Sydney closed 0.8 percent lower and Seoul eased 0.3 percent.
“Now we are waiting for the next big thing, which is payrolls (U.S.jobs data) on Friday”, he added, saying the first batch of Q3 GDP data at the end of October would be key.
The CME Group’s FedWatch tool showed the market pricing in more than a 30% chance of a hike in September, up from 18% before Yellen and her deputy Fischer spoke.
A gauge of the dollar rose to a two-week high after Fed officials fueled bets that the USA central bank may lift interest rates as soon as next month. “In the end, the US economy is doing well”.
Elsewhere, traders seemed less certain with most world stock markets dipping as they tried to second-guess the Fed’s timing of its next rate rise.
Concerns about the strength of the US economy remain, and were underscored by Friday’s second estimate of USA gross domestic product that showed second-quarter growth was slightly lower than previously thought.
The comments from Yellen and Fischer dragged Wall Street lower at the close.
Indices: Stoxx50 1.0% at 3029, FTSE little changed at 6,836, DAX +1.0% at 10,649, CAC-40 +1.03% at 4,469, IBEX-35 +0.8% at 8,684, FTSE MIB +1.47% at 16,900, SMI +0.4% at 8,217, S&P 500 Futures -0.01%. It held steady at 95.518 on Monday. The pan-regional FTSEurofirst 300 rose 0.5 percent as banking and industrial stocks advanced.
The dollar surged 1.3 percent against the yen JPY=D4 on Friday to a two-week high, its biggest one-day advance in nearly seven weeks.
Japanese household spending and retail sales data for July are due on Tuesday.
In commodities, the rally in the dollar and concerns about growing output after exports from Iraq in August exceeded July levels drove crude lower. USA crude was down 80 cents, or 1.68 per cent, at US$46.84 per barrel.
West Texas Intermediate crude, the USA benchmark for oil, settled lower by 1.39% on Monday to $46.98 a barrel.
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Despite the importance of this Friday’s employment number, market volatility remains compressed in an otherwise typically thin pre U.S/Canada holiday week (September 5).
