Europe close: Stocks drop despite dovish Fedspeak

Brainard said in her speech that experiences of economies such as that of Japan “highlight the risk of becoming trapped in a low-growth, low-inflation, low-inflation-expectations environment and suggest that policy should be oriented toward minimizing the risk of the USA economy slipping into such a situation”.

After rallying in Europe following the weaker than expected data from the United Kingdom and Germany, bond markets were subjected to renewed selling pressure during the NY session with U.S. yields sharply higher at three-month highs above 1.73%.

Stocks in the USA ended higher on Monday on the back of a dovish speech by Federal Reserve governor Lael Brainard, who said at the Chicago Council on Global Affairs that although economic progress is being made, it would be wise for the Fed to keep monetary policy loose. Private economists believe December is the most likely time for the Fed to hike rates for the first time this year.

After the US stock market fell 400 points on Friday, September 9, the Dow Jones Industrial Average rose 1.3% on Monday, September 12, after Brainard’s remarks. Earlier on Monday, Atlanta Federal Reserve chief Dennis Lockhart called for a “serious discussion” on a rate increase, as the USA economy nears “full employment”.

WALL STREET: The Dow Jones industrial average gave up 258.32 points, or 1.4 percent, to 18,066.75.

Evidence of Europe’s weak economic backdrop was provided by Italy on Tuesday as the country’s economy minister warned that the country would cut its growth estimates.

“It is the sudden burst of volatility that has investors scratching their head over whether it is a buying opportunity or a sign of more pain to come”, Lawler added. Brent crude, the benchmark for worldwide oil prices, rose 35 cents to $47.45 a barrel in London.

The dollar followed gains in US yields, which spiked after a 30-year Treasury bond auction in which some investors withheld bids. The yield on the 10-year Treasury note rose to 1.72 percent from 1.67 percent.

The S&P 500 posted 2 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 32 new highs and 44 new lows. Renesas’ offer values Intersil at 22.50 dollars per share, or 3.05 billion dollars. Bayer shares were up 0.8% in Frankfurt.

SLIMMING DOWN: Weight Watchers International slumped 81 cents, or 7.8 percent, to $9.55 after the weight loss company said CEO James Chambers will step down at the end of the month. Anadarko stock sank $1.12, or 1.9 percent, to $56.67 and Freeport-McMoRan fell 68 cents, or 6.1 percent, to $10.40. The stock has given up some of its gains lately.

London’s FTSE 100 index was up 0.3 per cent in afternoon trading, while the DAX 30 in Frankfurt rose 0.2 per cent and in Paris the CAC 40 dipped 0.1 per cent lower.

Elsewhere today, Asian stock markets struggled from the previous day’s hammering, as traders shrugged off Brainard.

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United Kingdom headline CPI inflation held at 0.6% compared with an expected 0.7% and the German ZEW index was weaker than expected with an unchanged reading of 0.5 for September, compared with expectations of a small advance. The US dollar stood at 102.59 yen, up from 101.85 and the pound bought US$1.3196, down from US$1.3336.