U.S. shares slip on Fed rate hike worries; dollar climbs

NEW YORK (Aug 30): U.S. stocks fell on Tuesday ,after stronger-than-expected U.S. consumer confidence data stoked worries about a potential Federal Reserve interest rate hike this year, while gained and the dollar climbed.

Conference Board data showed U.S. consumer confidence rose to 101.1 in August, beating economists’ expectations for a dip to 97.0, according to a Reuters poll. The data stoked expectations that the Fed could raise rates this year after top Federal Reserve officials have said recently that such a move was possible.

Fed Vice Chairman Stanley Fischer, in an interview with Bloomberg TV on Tuesday, said the U.S. job market is close to full strength and the pace of interest will depend on how well the economy is doing.

His comments came after Fed Chair Janet Yellen painted a rosy picture of the U.S. economy at an economic symposium on Friday and said the case for a rate hike was strengthening.

Investors were still awaiting more clues on whether the Fed will hike in September or December, including Friday’s U.S. August non-farm payrolls data. Some doubts as to whether the U.S. will be able to move next month helped European shares gain.

The dollar index, which measures the greenback against a basket of six major rivals, strengthened to a nearly three-week high of 96.047 as investors looked ahead to Friday’s jobs data. The report is expected to show employers added 180,000 jobs in August, according to a Reuters poll of economists.

“Any signs of strength make investors worry that the Fed will accelerate their plans to raise interest rates,” said Alan Gayle, head of asset allocation at Atlanta-based RidgeWorth Investments.

MSCI’s all-country world equity index was last down 0.15 points or 0.04% at 417.89.

The Dow Jones industrial average was last down 49.04 points, or 0.27% at 18,453.95. The S&P 500 was down 4.35 points or 0.2% at 2,176.03. The Nasdaq Composite was down 9.62 points or 0.18% at 5,222.71.

Europe’s broad FTSEurofirst 300 index was last up 0.63% at 1,358.88.

Oil prices fell for a second straight day in response to the dollar’s strength, but the downside was limited by production suspensions in the U.S. Gulf, due to an expected tropical storm. A strong greenback makes fuel purchases more expensive for countries using other currencies domestically.

crude was last down 60 cents or 1.22% at US$48.66 a barrel. U.S. crude was down 39 cents or 0.83% at US$46.59 per barrel.

U.S. Treasury yields were little changed, as traders awaited the U.S. jobs data. Benchmark 10-year U.S. Treasury yields were last at 1.565%, roughly unchanged from late Monday.

“If higher numbers come out (on the jobs report) and we get another strong reading, that could automatically boost odds of a September rate hike,” said Ninh Chung, head of portfolio management at SVB Asset Management in San Francisco.

The stronger dollar weighed on safe-haven prices. Spot prices were last down US$4.64 or 0.35% at US$1,318.37 an ounce.

Source: The Edge Markets

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