Nine of the ten S&P 500 sectors were in the red while Dow decliners led gainers by 2 to 1 with component stock Johnson & Johnson down by 1.6% in sympathy with heavy losses in the healthcare sector. Their comments came ahead of an annual meeting of central bankers from around the world in Jackson Hole, Wyoming, next week.
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“There is simply not enough room for central banks to cut interest rates in response to an economic downturn when both natural rates and inflation are very low”, he also added that a higher inflation target “would imply a higher average level of interest rates and thereby give monetary policy more room to manoeuvre”. The euro rose to 1.1277 dollars from 1.1183. The actions of the Bank of Japan (BOJ), European Central Bank (ECB) and the Bank of England (BoE) has left them with little ammo going forward and the U.S. Federal Reserve who tapered its QE program and started hiking rates past year has not changed monetary policy since December 2015.
But the dollar recouped some of its losses in early trading after Dudley’s comments.
New York Fed President William Dudley and Atlanta Fed chief Dennis Lockhart both said in public statements that the US central bank could raise the nation’s short-term interest rates at its September policy meeting.
Lockhart said he was not locked in to a particular date to hike but he cited ongoing job gains and “healthy” signs that inflation will pick up as possibly justifying a September move.
That measure increased to 37.8 percent from 37.4 percent for December, according to CME Group’s FedWatch tool. The Nasdaq composite fell 34.90 points, or 0.7%, to 5,227.11. Core inflation, which leaves out food and fuel prices, inched up just 0.1 percent for the month.
European shares pulled back from seven-week highs on Tuesday, weighed down by industrial stocks after Swiss firm Schindler lowered its outlook for 2016.
The dollar index was little changed at 94.811 after losing 0.8 percent on Tuesday, when it touched a 7-week trough of 94.426.
The CAC 40 in France shed 0.8 percent, and Britain’s FTSE 100 lost 0.7 percent.
Gold rose for a second day on Tuesday as the dollar weakened on lower expectations of a US Federal Reserve interest rate hike this year.
Gold has cut its gains after mixed United States economic data failed to give clarity on the prospects for a USA interest rate rise this year and the U.S. dollar pared losses from a seven-week low.
Gold has advanced this year as the Fed has yet to add to last year’s rise, which was the first in nearly a decade.
The two-year yield, which is sensitive to traders’ views on Fed policy, was up 2 basis points at 0.750 percent after touching a near three-week peak at 0.758 percent.
Oil settled up almost 2 percent on Tuesday, hitting five-week highs for a second straight day as sources at OPEC spoke of Saudi Arabia’s apparent desire for higher crude prices while Russian Federation met the producer group to discuss the market. Brent crude, a benchmark used to price global oils, rose 61 cents, or 1.3 percent, to $48.96 a barrel in London. It rose more after settlement, reaching $49.34, its highest since July 7.
In a separate report on Tuesday, the Fed said US industrial production shot up 0.7 percent last month after rising 0.4 percent in June. Kansas City Federal Reserve President Esther George was once again the lone dissenter with a vote for higher rates in July.
Spot gold was up 0.7 percent at $1,347.95 an ounce by 3:07 p.m. EDT (1907 GMT), retreating from an earlier 1.3-percent gain.
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“This is because the markets now expect only one or two rate hikes this year, when at the end of 2015 they had expected up to four”, added Ishikawa, who sees negative economic developments in Europe and Britain in the wake of Brexit weighing on the Fed’s decisions and cancelling out any lift from positive USA indicators. USA gold settled up 0.7 percent at $1,356.90.
