New York/London: US stocks were little changed, circling in a holding pattern as investors awaited Friday’s speech from Federal Reserve Chair Janet Yellen for clues on when to expect higher borrowing costs.
The S&P 500 Index fell 0.1 per cent to 2,184.57 at 9.32am in New York, after briefly climbing yesterday above its August 15 record close. The gauge has gone 32 days without a 1 per cent move in either direction, the longest since 2014.
“Yellen’s comments are the focus,” said Daniel Weston, chief investment officer of Aimed Capital in Munich. “She may well signal there could be a rate hike next month, but equities should stay fairly solid, as that small upward change in interest rates won’t hugely hurt earnings.”
Investors are turning their attention to the Fed chair to see whether she will endorse recent comments from other central-bank officials that indicated rates could rise as early as next month. Odds of an increase in September have climbed to 28 per cent, from 10 per cent a month ago, while bets on a December hike have risen to 51 per cent from 36 per cent at the end of July.
Hawkish remarks from Fed officials last week, lacklustre data and lofty stock prices combined to curb the rally that drove the S&P 500 to fresh records this month amid better-than-estimated earnings. The index rose almost 20 per cent since reaching a 22-month low in February, and trades near its highest valuation in more than decade, based on estimated income.
Earlier, the FTSEuroFirst index of the leading 300 European shares was up 0.5 per cent at 1,358 points, having earlier fallen as much as 0.4 per cent, and Germany’s DAX staged a similar rebound to trade up 0.5 per cent. Britain’s FTSE 100 was little changed, capped by weakness in British mining giant Glencore after it reported a fall in underlying profit and lowered its debt target.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4 per cent, with traders cashing in on its rise of more than 14 per cent since late June.
Japan’s Nikkei rose 0.6 per cent, supported by a slightly weaker yen, while MSCI’s main global stock index fell 0.1 per cent.
Hawkish Yellen?
The dollar consolidated ahead of a gathering of global central bankers later this week in Jackson Hole, Wyoming, where the focus will be on Friday’s keynote speech by Federal Reserve Chair Yellen.
The dollar was up slightly against the yen at 100.25 yen, holding above the psychologically important 100 level, and the Euro fell 0.25 per cent to $1.1274 (Dh4.14).
The dollar index of its value against a trade-weighted basket of currencies rose to 94.67, after falling more than 1 per cent last week.
“Seemingly in anticipation of a relatively hawkish message from Fed Chair Yellen ... the dollar is making modest gains,” RBC Capital Markets analysts wrote in a client note on Wednesday.
“But other markets are more circumspect about the prospect of Yellen signalling a tougher stance on monetary policy,” they added.
One is the bond market. The 2-10 US yield curve flattened to 78 basis points earlier on Wednesday, suggesting investors are lukewarm on what higher borrowing costs will do for the US and world economy.
