The argument over the timing of a rate rise seems to have come down to whether low unemployment levels pose an inflation risk. The STOXX 600 remains down by around 6 percent so far in 2016.
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The London interbank offered rate on three-month dollars, a benchmark for more than $300 trillion worth of financial products worldwide, declined to 0.85028 percent from 0.85578 percent on Monday.
Over the previous year, Brainard has been one of the Fed’s most vocal defenders of low interest rate policy, arguing the United States is vulnerable to economic troubles in Asia and Europe.
ANALYST’S COMMENT: “The continuous debate surrounding the prospect of a US rate rise continues to dominate market sentiment as USA policymakers continue to gear up the markets for a further rate rise later this year”, said Michael Hewson, chief market analyst at CMC Markets.
“I still think the pressure is to the downside”, he said. Brainard was in agreement with another Governor, Daniel Tarullo, that more evidence that inflation is returning sustainably towards target needs to be seen before raising interest rates. However, the Hang Seng index in Hong Kong lost 0.3 percent.
OVERSEAS: Germany’s DAX lost 0.4 percent while France’s CAC-40 slipped 1.2 percent.
The Aussie dollar, surprisingly strong through a period when expectations for easier monetary policy there have grown, was also down 0.4 percent. (117930.SE) ended 0.8% higher after the first of its stranded US -bound vessels began off-loading containers in California on Monday.
The dollar hovered moderately below ¥102 in late Tokyo trading on Tuesday amid receding expectations of an interest rate hike by the U.S. Federal Reserve this month.
Fears of a September rate hike had sent the three major US stock indexes tumbling on Friday in their worst decline since Britain’s June 23 “Brexit” vote to leave the European Union. Japan’s Nikkei 225 gained 0.3 percent to 16,729.04 and South Korea’s Kospi rose 0.4 percent to 1,999.36 as Samsung Electronics, in the midst of a recall of its Galaxy Note 7 smartphones, gained 4.2 percent, recovering more than half of Monday’s loss.
Fed funds futures on Tuesday showed traders saw just a 15 percent chance of a rate hike when the Fed meets next week, compared to a more than 55 percent chance of a hike in December, according to CME Group’s FedWatch program.
In a speech on Monday, Brainard says economic progress continues in the USA, but the Fed would be wise to continue keeping policy loose.
Six-month Libor increased to 1.24894 percent from Monday’s 1.25528 percent, which was the highest since June 2009. Brent crude, the benchmark for global oil trading, lost 88 cents to $47.44 a barrel in London.
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Overnight, the MSCI Asia Pacific Index fell 0.1% with Japan’s Topix index ending the session little changed.
