There are, however, divergent theories about the gap between FOMC member’s expectations of interest rate hikes in the United States and that being now priced in by financial markets, with some bankers pricing in less than a 5% probability of a rate increase at the Fed’s next meeting in June, far below the numbers factored in by others. Even after last week’s advance, the Stoxx 600 is down 3.6 percent from its recent peak. Fed Funds futures are now indicating for the first time since March a better-than-even chance that the USA central bank will raise interest rates by its July meeting.
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Dow Jones Industrial Average fell 14 points to 17,485, while the S&P 500 index slipped 1 point to 2,051.
Surprisingly strong data on U.S. new home sales in April supported the view the economy may be strong enough for the Fed to raise interest rates as early as June, pushing U.S. Treasury prices to session lows.
Most markets in Asia ended lower on Tuesday, with Japan and China leading the pack lower as investors in the region took after their USA counterparts in playing wait-and-see with the Federal Reserve. The Nikkei 225 again declined on a rising yen, off 0.94% as traders also mulled a retreat in Shanghai markets. Analysts at Citigroup said if the USA dollar Index busts through 100 again, gold prices could drop (http://www.marketwatch.com/story/this-one-thing-could-send-gold-tumbling-below-1000-again-citi-2016-05-23) through $1,000 an ounce. Brent crude, used to price global oils, rose 20 cents to $49.13 a barrel in London.
In the NY session, U.S. new home sales data for April and U.S. Richmond Fed manufacturing index for May are set to be published.
Still, the rate outlook remains in focus and investors will look to data this week and comments yesterday from regional Fed chiefs for St Louis, San Francisco and Philadelphia for indications on the trajectory of borrowing costs. The data is due at 9:45 a.m. ET. On Monday, U.S. stocks closed lower in low volume trade.
However, said Bullard in a speech in Beijing, “US evidence from labor markets, actual inflation readings and global influences suggests the FOMC median projection may be more almost correct”.
The Bloomberg Dollar Spot Index, which tracks the dollar versus 10 peers, added 0.8 percent this week with the greenback moving up 0.8 percent to $1.1224 per euro and gaining 1.4 percent to 110.15 yen.
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European stocks (http://www.marketwatch.com/story/european-shares-fall-as-bayer-fiat-come-under-pressure-2016-05-23) traded lower.
