US consumer spending increased for a fourth straight month in July amid strong demand for automobiles, pointing to a pickup in economic growth that could pave the way for the Fed to raise interest rates this year.
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She gave no timeframe during her speech at the annual Jackson Hole symposium of global central bankers, but Fed vice chairman Stanley Fischer later said September was a possibility.
Fischer’s remarks appeared to reinforce the market’s shifting interest-rate hike expectations, while a reading of US consumer confidence beat expectations, leading yields to initially rise. Some had identified the risk that Fischer might offset or add to his market-moving thoughts from Friday, but his interview offered nothing in terms of further policy clues.
Speaking to Bloomberg TV, Fischer also commented that the United States was close to full employment, but was constrained in terms of productivity growth.
He said attention may now be focused on key jobs data, due to be released Friday, “which if it exceeds expectations could provide another compelling reason for the Fed to act”.
Wells Fargo (WFC.N) rose 2.5 percent and provided the biggest boost to the S&P, while JPMorgan (JPM.N) and Bank of America (BAC.N) rose about 1.1 percent.
The prospects of higher USA interest rates found European shares lose ground. Gold declined to a month’s low at $1,321 an ounce, whereas Brent crude retreated 1.4% to $49.41 a barrel.
India’s benchmark Sensex index rose 0.29% or 81.43 points to 27,863.68. The dollar index was little changed at 96.073 after rising to 96.143 overnight, its highest since August 9. US shares were set for a modest open, with Dow and S&P 500 futures unchanged. The Tokyo market was an exception and gained on prospects for a strong dollar.
The euro ticked up to US$1.1200 and 114.43 yen from US$1.1195 and 113.94 yen in USA trade.
Gold is highly-sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
Fischer said Tuesday he expected improvement in productivity growth because “there are remarkable things going on on the technological front but they are not yet in the data”. Earlier today, stocks firmed when a report showed consumer spending in the USA rose 0.3 percent in July, in line with expectations.
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The commodities-related European oil and gas and basic resources sectors were the only ones in negative territory, down 0.2 percent and 2.1 percent respectively.
