Global markets have been whipsawed by comments from regional Fed presidents including William Dudley and John Williams that indicated USA borrowing costs may rise as early as next month.
Advertisement
“Certainly, the news out of Nigeria, Iraq was a catalyst to get this market a bit lower”, said Bart Melek, head of global commodity strategy at TD Securities in Toronto. Shares of Marathon Oil fell $1.16, or 6.9%, to $15.64.
Preliminary gauges of this month’s manufacturing activity in Germany, the euro area and the U.S. are scheduled for release on Tuesday, while central banks in Turkey and Hungary have policy meetings.
Investors should also note that the July Fed minutes showed a divide among the Fed officials.
West Texas Intermediate for October delivery was at US$47.34 a barrel on the New York Mercantile Exchange. Prices dropped as much as 1.7 per cent earlier. Oil climbed on speculation Iran may be more willing to co-operate with other producers seeking to freeze output. “There is still plenty of supply around”. The British Pound also rebounded to 1.3156 before backing off to 1.3148, up 0.0074 or 0.57%. This combination lessened the threat of gold selling and, with no further test of support close to $1,330 per ounce, there were gains back to the $1,340 area. The metal, which is used to galvanise steel, has surged more than 40 percent this year. The pan-European Stoxx Europe 600 index edged up 0.1%. London time. France’s services sector led a pickup in economic activity this month, offsetting a sixth contraction in manufacturing, according to preliminary purchasing managers’ indexes published Tuesday by Markit Economics.
Federal funds futures on Monday suggested traders saw a 51 percent chance of a Fed rate hike this year, according to data from CME Group’s FedWatch program. The Topix lost 0.5 percent, Australia’s S&P/ASX 200 Index added 0.3 percent and South Korea’s Kospi gained 0.2 percent.
“The way investors are starting to get biased right now is that yes, maybe we get a little bit of a boost to the dollar from this one hike this year, but if the longer-term picture is still relatively benign, this supports risk sentiment” and works against the dollar, Vassili Serebriakov, a foreign-exchange strategist at Credit Agricole CIB in NY, said in a Bloomberg TV interview.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 peers, was little changed as of 8:22 am in Tokyo after racking up two days of gains. The dollar rose 0.2% against the Japanese yen to ¥100.40. All of this adds up to increased volatility by the U.S. Dollar. In recent days, Fed Vice Chairman Stanley Fisher signaled that a 2016 rate hike is still under consideration, saying the USA economy is close to meeting the central bank’s goals. Treasury two-year yields rose to the highest level in two months. Bank of America’s MOVE Index, which measures price swings in Treasuries, was at 67.87.
Advertisement
The yield premium that investors demand for holding Italian 10-year debt instead of benchmark German bunds has widened from a four-month low reached on August 15. The move comes after the yield on similar-maturity United States notes fell by four basis points on Monday. “The market is not quite ready to push through the 1.60 percent ceiling that has prevailed for Treasuries since Brexit”.
