Yesterday´s overnight Dollar weakness is over, the dollar climbed, while Asian stocks fell to the lowest level in seven weeks and crude oil fell after speculation that the Fed will raise interest rates as soon as next month. The pound rose and European shares gained thanks to a weaker euro.
“The market seems to be taking a cautious stance ahead of the Fed Chair Janet Yellen’s speech later this week,” said Jung Sung-yoon, a foreign exchange analyst at Hyundai Futures.
“A rise in the dollar would be a big help for European stocks” Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank told Bloomberg. “People are testing whether the market has found a bottom, and there’s plenty of money sitting on the sidelines. We’ve had pretty calm, sideways trading this month even with another Fed rate hike looking more likely.”
Other analysts were not that optimistic: Yang Hai, analyst at Kaiyuan Securities, said trading will likely remain dull for a while as economic sluggishness discourages investor participation. “The current economic environment doesn’t justify a sustainable rebound. In addition, regulators are reducing leverage in the asset management industry so money is not flowing in.”
- the USD touched its strongest level in eight weeks against the euro, sending all 19 Stoxx 600 sectors higher with basic resources, banks outperforming and tech, financial services underperforming.
- Australia’s dollar and the Malaysia’s ringgit were among the biggest losers, as the prospect of higher interest rates boosted demand for the greenback.
- The stronger dollar also weighed on commodities, as gold headed for its longest losing streak since November and
- Brent crude oil declined for a fifth day.
- Sterling was boosted by a poll showing support for staying in the European Union is solidifying, while
- the Turkish lira gained after a cabinet reshuffle.
According to Bloomberg, Fed Funds futures are indicating for the first time since March a better-than-even chance that the U.S. central bank will raise interest rates by its July meeting.
The speculation is driving a dollar rally that’s reminiscent of early January, when a global equities selloff wiped out about $7 trillion of market value following a December rate hike by the Fed. Unlike back then, oil and China’s yuan are showing signs of stability.
Federal Reserve Bank of Philadelphia President Patrick Harker said he could see two to three rate hikes in 2016.
“Markets remain fragile as talks of a U.S. interest- rate hike in June puts some fear on whether global growth will remain resilient,” said Niv Dagan, Melbourne-based executive director at Peak Asset Management LLC. Williams and Bullard “both struck hawkish tones. The timing of future Fed rate hikes in the face of a sluggish economy is a major focus among stock investors who have benefited from historically low borrowing costs since the 2008 financial crisis.”
- The Stoxx Europe 600 Index added 0.9 percent, led by miners and banks.
- S&P 500 futures gained 0.2 percent, signaling that the main index will recover after falling 0.2 percent Monday.
- The MSCI Emerging Markets Index of stocks dropped 0.6 percent. The measure is down 1.2 percent this year and trades at 11.2 times its projected 12-month earnings, data compiled by Bloomberg show.
- The Borsa Istanbul 100 Index jumped 1.9 percent.
- S&P 500 futures up 0.3% to 2052
- Stoxx 600 up 0.9% to 341
- FTSE 100 up 0.5% to 6168
- DAX up 0.6% to 9899
- S&P GSCI Index down 0.4% to 363.5
- MSCI Asia Pacific down 0.9% to 125
- Nikkei 225 down 0.9% to 16499
- Hang Seng up 0.1% to 19830
- Shanghai Composite down 0.8% to 2822
- S&P/ASX 200 down 0.4% to 5296
- US 10-yr yield unchanged at 1.84%
- German 10Yr yield down 1bp to 0.17%
- Italian 10Yr yield down 3bps to 1.45%
- Spanish 10Yr yield down 2bps to 1.56%
- Dollar Index up 0.19% to 95.41
- WTI Crude futures down 0.5% to $47.86
- Brent Futures down 0.7% to $48.03
- Gold spot down 0.4% to $1,244
- Silver spot down 0.6% to $16.29
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