People walk by an electronic stock board of a securities firm in Tokyo, Monday, Sept. 12, 2016.
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The Dow Jones industrial average soared 240 points – almost 1.5 per cent – Monday.
Treasury prices ended modestly higher, with the 10-year yield ticking a basis point lower to 1.67% and the two-year yield slipping 2 bps to 0.77%.
On Monday afternoon, federal-funds futures was pricing in an 11% chance of a rate hike when the policy-setting Federal Open Market Committee convenes for a two-day confab on September 20-21, according to CME Group.
Traders see a 22 percent likelihood of a Fed boost next week, futures show, based on the assumption that the effective fed funds rate will trade at the middle of the new target range.
The dollar, on the other hand, nursed losses against its peers after Brainard reiterated her dovish views and warned against a rush to raise rates.
Just a few hours before the president of the Atlanta Fed, Dennis Lockhart, had said that data released over the past few weeks, “warrant.serious discussion of a policy rate increase”. More rate hikes were expected to follow quickly, but the Fed has held off.
The Minneapolis Fed chief said investing in infrastructure while borrowing costs are still near record lows, “simplifying the tax code and making it more consumption-oriented”, and reducing the regulatory burden of businesses are policies with “little downside risk”.
Fortescue Metals Group Ltd, the world No 4 iron ore producer, rose more than 4 per cent after announcing a US$700 million term loan repayment.
North American stock prices rose on Monday after Federal Reserve policymakers expressed caution about the need to raise USA interest rates, sharply cutting into losses in European equities, but Asia finished lower, tracking Wall Street’s large decline on Friday.
Fed governor Lael Brainard reassured investors after she said in a speech that the risk with raising rates too soon was that it could damage the fragile economy by igniting inflation. Perrigo said it will review Starboard’s comments.
Brainard also noted that annual USA inflation has been coming in below the Fed’s 2 per cent target.
“She resurrected some of the concerns for why the Fed shouldn’t raise rates”, Quincy Krosby, an analyst at Prudential Financial, said on CNBC. [O/R] September tends to be a month of lower returns for stocks, and traders said this year could be no exception given the abundance of uncertainties including the rate outlook and November’s US election. The euro rose to $1.1241 from $1.1228.
The dollar dipped 0.1 percent to 101.940 yen JPY= after shedding 0.8 percent overnight.
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Brent crude futures LCOc1 were up 1.1 percent at $48.58 a barrel, having recovered from a session low of $46.90, while USA crude CLc1 rose from an intraday low of $44.72 to trade at $46.47, up 1.2 percent. Brent crude, the benchmark for global oil trading, climbed 25 cents to $48.26 a barrel in London.
