Stocks started the day lower following Friday’s drop, but they soon rallied.
Advertisement
FED FACTOR: Markets are watching for what the Federal Reserve might do on interest rates, weighing various economic indicators.
However, stocks did not appear directly influenced by Brainard’s remarks on Monday.
In other commodities, light sweet crude (WTI) oil futures on the Nymex slid $1.21 or 2.6 percent to $45.08 per barrel while the most active Comex silver contract at $19.075 per ounce was up 0.75 cents.
“Recent experience suggests global financial markets are tightly integrated, such that disturbances emanating from Chinese or euro-area financial markets quickly spill over to U.S. financial markets”, she said.
Brainard’s comments tempered expectations of a September rate hike, but a tightening of Fed policy is still on the cards before the year is out.
Wall Street opened lower today, with energy stocks falling on lower oil prices and financials hit by diminished prospects of an interest rate hike in the near term.
“There’s not enough ammunition for a September rate rise”. Some analysts had raised the probability she might signal the central bank would increase interest rates at the upcoming meeting.
Evidence of Europe’s weak economic backdrop was provided by Italy on Tuesday as the country’s economy minister warned that the country would cut its growth estimates.
Their comments sent United States and European stocks tumbling Friday and hammered Asian equities Monday.
Asked about Trump’s remarks, Brainard said Congress created the Fed to be independent of the executive branch and empowered it to pursue maximum employment and price stability. More rate hikes were expected to follow quickly, but the Fed has held off.
The global economy has been sputtering.
The dollar followed gains in USA yields, which spiked after a 30-year Treasury bond auction in which some investors withheld bids.
Markets overseas took sharp losses following the rout in the U.S. Friday.
“The fallout from adverse foreign shocks appears to be more powerfully transmitted to the US than previously”, she said.
Worldwide economic conditions also argued in favor of caution, said Brainard, noting that weak growth and low inflation in Europe and Japan as well as instability in China could impinge on the USA economy.
“I think that September has a lot of enhanced moves in both directions and I think we’ll have a lot more”, Cappelleri said. However, while recent data points to improving labor market conditions, Brainard said that the move toward full employment, “has been, and likely will be, somewhat gradual”. And the unemployment rate has dropped to a healthy 4.9 percent.
Investors have been anxious about a possible slowdown in economic growth.
Advertisement
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.
