A sharp pullback by the price of crude oil also weighed on the markets, with crude oil for September delivery slumping $1.47 to $46.75 a barrel.
Advertisement
“The market’s pricing in well below what any economist or strategist is pricing in”, UBS Deputy Chief U.S. Economist Drew Matus told CNBC’s “Squawk Box” on Monday.
At 9:36am ET (1336 GMT), the Dow Jones industrial average was down 84.71 points, or 0.46%, at 18,467.86.
The curve flattened as the spread between the 2-year and 10-year yields narrowed by 2.4 basis points to 48.1 basis points, indicating outperformance for longer-dated maturities. West Texas Intermediate was down 3.1% at $47.64 a barrel and Brent crude was 3.1% lower at $49.35. The improvement in job gains over the summer months and better than expected economic data overall coupled with a strong equity market performance in the U.S. are all indicative that the Fed could, sooner or later, begin, or rather resume the process of normalising its monetary policy. Whether it is September or December, the bias for the U.S.to raise rates should remain and the bias for a weaker Canadian dollar should persist into 2017. “Moderate” is a common term used by the central bank, but the minutes left open the question of whether the second-quarter GDP report-which came in at an anemic annualized 1.2 percent growth, but wasn’t reported until after the July 27 meeting-will affect the Fed’s assessment of the economy much.
“The big surprise (at Jackson Hole) would be a hawkish shift from Yellen which would be enough to rock the boat on risk and send USA rates and the dollar sharply higher”, said Brad Bechtel, managing director at Jefferies in NY.
The two sets of comments highlighted the divergence of monetary policy in Japan and the United States and provided much-needed support to the dollar, which last week fell below 100 yen following disappointing USA economic data. Although total PCE inflation was less than 1 percent over the 12 months ending in June, core PCE inflation, at 1.6 percent, is within hailing distance of 2 percent-and the core consumer price index inflation rate is now above 2 percent. Eastern. The Standard & Poor’s 500 index was unchanged at 2,183 and the Nasdaq composite rose nine points, or 0.2 percent, to 5,247.
Monday, August 22, The dollar increases compared to the other main currencies, as the current expectations for a possible USA rate hike before the year end gave support to the greenback.
The housing data helped traders fill the gap as markets await an annual gathering of global central bankers and a speech by Fed Chair Janet Yellen on Friday in the mountains of Wyoming.
Gold fell on Monday to its lowest in more than a week as the dollar strengthened, before recovering slightly.
DRUG DEAL: Cancer drug maker Medivation jumped $13.34, or 20 percent, to $80.49 after pharmaceutical giant Pfizer announced it would buy the company for $14 billion, or $81.50 a share.
Advertisement
We’ve already seen a similar such occurrence taking place around the most recent FOMC meeting in July. The equivalent developed market index has a yield of just 3.9 percent and trades at almost 18 times annual earnings.
