Fed Chair Janet Yellen said on Friday the case for a rate increase was strengthening, but provided little detail on when the Fed would next move. Banks are still one of the biggest laggards on the stock market over the past year. The market sold-off on Friday after Fischer suggested there may be as many as two rate hikes before the end of the year.
Advertisement
The CME Group’s FedWatch tool showed the market pricing in more than a 30 percent chance of a hike in September, up from 18 percent before Yellen and her deputy Stanley Fischer spoke.
Bottom line, the Federal Reserve will want to take immediate advantage of the fact that the economy has been “resilient to a number of shocks” as of late while the “risk of further shocks now looks lower”.
“U.S rates are likely to rise, whereas the European Central Bank, the Bank of Japan and the Bank of England are still looking to ease policy”.
Japan’s benchmark Nikkei 225 added 2.2 percent to 16,719.31 in early trading. British markets were closed for a holiday.
Iran also said late last week that it would only cooperate in upcoming producer talks in September if other exporters recognized Tehran’s right to regain market share lost during worldwide sanctions that were only lifted in January. Hong Kong’s Hang Seng slipped 0.5 percent to 22,788.02, while the Shanghai Composite lost almost 0.3 percent to 3,062.52. The financial sector of the S&P 500 has gained just 1.8 percent in 2016 versus a 6.7 percent increase for the broader index. On an annualized basis, core PCE prices rose 1.6%, broadly in line with forecasts.
Amid thin volumes in Europe with London shut for a public holiday, the dollar rose 0.5 percent to 102.39 yen, its highest since August 9.
Investors will be keeping an eye on upcoming US data to gauge if the world’s largest economy is strong enough to withstand a rise in borrowing costs in the weeks ahead. Oversupply remained a major concern with US crude stockpiles forecast to have risen by 1.3 million barrels last week, a Reuters poll showed. Brent crude, used to price oil internationally, lost 78 cents to $49.37 a barrel.
Gold for December delivery on the Comex division of the New York Mercantile Exchange fell 0.06% to $1,326.255 a troy ounce.
The yield on the benchmark 10-year bond rose 2-1/2 basis points to 2.265 percent and the yield on 7-year note ended 2-1/2 basis points higher at 1.970 percent and the yield on short-term 2-year note also bounced 3 basis points to 1.840 percent.
Advertisement
The stronger dollar also weighed on oil prices as it makes the commodity more expensive for those using weaker currencies. Gold edged up $1.20 to $1,327.10 an ounce, silver gained 11 cents to $18.86 an ounce and copper edged down less than a penny to $2.08 a pound.
