United States stocks closed slightly higher on Tuesday, 06 September 2016 with the tech-heavy Nasdaq logging a record close as investors digested a weak services-sector report, which might help convince the Federal Reserve to stay its hand as it considers raising interest rates.
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Wall Street looked set to open flat to slightly lower, according to index futures.
Needless to say, the weakness in the manufacturing sector mirrored on the labor market as employment in manufacturing, mining and construction fell.
But European shares dipped in early trade.
US JOBS: Job gains slowed in most major industries in August and wages only rose a little. Then ECB meets on Thursday.
Fed Chair Janet Yellen said last month that the USA central bank was getting closer to raising interest rates, possibly as early as September, saying that the Fed sees the economy as close to meeting its goals of maximum employment and stable prices.
KEEPING SCORE: France’s CAC 40 added 0.1 percent to 4,546 and Germany’s DAX edged up 0.3 percent to 10,705.
Equity investors seconded this thought with all key indices remaining in the green. And more than 22 years of Fed behaviour suggests, it will not hike rates unless the market is prices in a better than 50 per cent chance.
Japan’s Nikkei index, however, retreated 0.4 percent as a strong yen hurt exporters.
The dollar index dropped 1 percent to 94.821, its lowest since August 26.
US interest rate futures price 0#FF: gained to indicate only about 15 percent chance of a rate hike this month and just over 50 percent even by December, compared to above 20 and 60 percent, respectively, before the data were released.
Australian dollar YTD, Market implied chance of a Sep Fed rate hike and difference between Australian and U.S. 10-yr government bond rate. The euro was down 0.1 percent at $1.1242.
On Tuesday, the dollar fell more than 1 percent against the yen, slipping to 102.05 yen per dollar.
The data was the first to cover output exclusively for the period after the June 23 vote to leave the European Union. “When you pair that with data we got Friday, which was non-farm payrolls, disappointing some, what it does is it starts to kick back interest rate expectations past the September meeting and even lowering them in December too”, said John Doyle, director of markets at Tempus Inc in Washington.
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MARKET REACTION: The pound rose on the news, trading 0.2 percent higher at near seven-week highs of $1.3322. Benchmark U.S. crude oil gained 70 cents to $45.14 a barrel in electronic trading on the New York Mercantile Exchange, while Brent crude, the benchmark for global oil prices, rose 67 cents to $47.50 a barrel. The euro rose to $1.1255, its highest since August 26 after the data.
