US stocks had racked up their strongest gain in two months on Monday after Federal Reserve Board Governor Lael Brainard stuck to her dovish stance on interest rates and urged caution about removing monetary stimulus too quickly.
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Growing concerns that global central banks’ commitment to monetary policy stimulus may be waning have weighed on risk-sensitive assets and currencies, such as the Canadian dollar, over the past few days.
As investors sought safe-play picks, retail giant Wal-Mart rose 1.64 dollars, or 2.3%, to 71.94 dollars and Procter & Gamble gained 2.01 dollars, or 2.3%, to 88.25 dollars. The Standard & Poor’s 500 index rose 31.23 points, or 1.5%, to 2,159.04. The iShares Nasdaq Biotechnology ETF (IBB) rose 3.1%.
“The impact of Brainard might have been somewhat exaggerated really by the fact the market was already skewed towards thinking the Fed would not hike rates in September”, said Alan Ruskin, global head of FX strategy at Deutsche Bank in NY.
Traders work on the floor of the New York Stock Exchange. Stocks had surged on Brainard’s comments, briefly pared gains, then turned back toward session highs.
The euro came under mild pressure after the ZEW Centre for Economic Research said that its index of German economic sentiment was unchanged at 0.5 this month. “That dip was a little profit-taking, but the market wanted a dovish comment and that’s what they got”.
Stocks soared Monday after an influential Fed policymaker indicated she was in no hurry to raise interest rates despite intensified speculation that the Fed is poised to tighten USA borrowing rates.
The Fed is widely seen keeping interest rates unchanged at next week’s meeting as well as at its November 1-2 policy review.
Minneapolis Fed President Neel Kashkari said “politics does not play a part” in the Fed’s deliberations and that current low USA inflation means there is no “huge urgency” to hike.
Lockhart isn’t among the 10 voting members of the Fed’s interest-rate setting panel this year.
The Final Word: Fed-speak continues to influence the financial markets in a big way ahead of next week’s FOMC meetings. 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.
Many other policymakers think the US job market is near full strength and Fed Chair Janet Yellen argued in July the case for rate increases has strengthened.
On Monday, the USA 10-year Treasury yield climbed to 1.697 percent, its highest since June 24. Video footage showed her stumbling into her van after she left early from New York City’s ceremony marking the 15th year since the September 11, 2001, terrorist attacks. Economic weakness ‚à “úcounsels prudence, ‚à “ô‚à “ô she said”.
OIL: Benchmark U.S. crude fell 53 cents to $45.75 per barrel in NY.
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The VelocityShares 3x Long Crude ETN (UWTI) rose 1%. Shares on consumer-staples companies added 1.9%, while Apple Inc. advanced 2.2%.
