Asian stocks tumbled Monday, as investors reacted to comments last week from a Fed official, who caught markets off guard by saying that interest rates could rise soon. Technology companies also jumped. European stocks .FTEU3 ended down 1 percent, cutting an earlier loss in half. Those stocks took some of the biggest losses Friday. The Fed’s leaders will meet next week.
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The comments solidified the view the US central bank would leave interest rates unchanged next week. Low rates have fueled a steady rise in stock prices as investors put their money in high-risks stocks instead of low-interest savings accounts or bonds. They could also ding corporate earnings by raising companies’ borrowing costs. “It’s safe to assume that investors believe that September is not going to be the month where the Fed pulls the trigger”. Phone companies also rose and AT&T gained 53 cents, or 1.3 percent, to $40.24. Those stocks took some of the biggest losses Friday.
David Kelly, chief global strategist for JPMorgan Funds, said he thinks Federal Reserve policymakers seem “noncommittal” and aren’t sure if they should raise interest rates now or not.
Marko Kolanovic, global head of derivatives and quantitative research at JP Morgan, argued in a note last week that normalization of interest rates will pose difficulties for markets even if it is extremely gradual.
Chris Beuachamp, at IG Index, said the first week of September had lulled investors into a false sense of security, broadly replicating as they did the range bound trading of July and August. “What’s one quarter of one percent?”
The new company will be based in Saskatchewan province, 52-percent owned by Potash shareholders, with Agrium owners holding 48 percent. USA stocks recovered somewhat on Monday (http://www.marketwatch.com/story/dow-futures-slump-more-than-100-points-as-rate-hike-fears-linger-2016-09-12), with all three major benchmarks trading higher.
Japan’s benchmark Nikkei 225 index lost 1.5 percent to 16,707.73 and South Korea’s Kospi slid 2.0 percent to 1,997.54. Virtually ignored by investors since that bottom is the fact that the interest rates have quietly moved back up to 1.64 percent.
In commodities markets, crude oil prices ended higher, with traders citing a weaker U.S. dollar and stronger United States stocks. Elsewhere, Apple rose $2.30, or 2.2 percent, to $105.43 and communications chip maker Broadcom picked up $3.63, or 2.3 percent, to $164.41. Starboard Value said Perrigo needs to boost profit margins for some of divisions, and notes that the company’s stock hasn’t done well since Perrigo rejected an offer from competitor Mylan NV.
“The market right now is battling with the timing and how likely it is that they get a hike off this year”, said Aaron Kohli, interest rate strategist at BMO Capital Markets in NY.
OIL: U.S. crude rose 17 cents to $46.05 a barrel in NY. Brent crude, the worldwide benchmark, was down 80 cents a barrel at $47.51.
Energy Transfer Pipeline fell 85 cents, or 2.2 percent, to $38.29. On Friday a federal judge ruled that the company can build a $3.8 billion pipeline meant to carry oil from North Dakota to IL.
Pharmaceutical companies AstraZeneca, Shire and Reckitt Benckiser were some of the only stocks making gains on the FTSE 100. But the federal government temporarily stopped the project and several agencies said they will reconsider some of their decisions.
The Standing Rock Sioux tribe wants to stop construction of part of the pipeline because it crosses sacred sites and approaches a lake that provides drinking water for a reservation in southern North Dakota. Horizon added $1.20, or 7 percent, to $18.46.
In other energy trading, wholesale gasoline gained 3 cents to $1.39 a gallon.
Gundlach’s view is that with America’s current 4.9 percent unemployment rate below its 12-month moving average, there is “no chance of recession”. Perceived chances of a September hike, as implied by futures trading, fell to 15 percent from 24 percent yesterday, with the first increase not priced in until December, after the November 8 presidential election. Silver declined 0.6 percent to $18.9425 an ounce.
The dollar index was last down 0.2 per cent. Meanwhile, France’s CAC 40 was up 0.13%.
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The benchmark U.S. Treasury yield US10YT=RR turned higher mid-session Monday and hit a session high of 1.697 percent, the highest since late June. Hong Kong’s Hang Seng .HSI added 0.8 percent and Shanghai .SSEC bucked the trend to lose 0.2 percent.
