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Fed View Only Partly Soothes Market, Global Stock Edge Up

Fed View Only Partly Soothes Market, Global Stock Edge Up
Even as any sense of calm in European markets looked fragile, after a Federal Reserve official argued against raising U.S. interest rates too quickly, European shares rose modestly and the dollar firmed on Tuesday.
The dollar was helped to be weakened and U.S. stocks were pushed higher and yields on low-risk government bonds were driven lower by Fed Governor Lael Brainard's remarks on Monday which saw already slim expectations of a rate hike this month reduced further.

A day after the Dow Jones Industrial Average  and the S&P 500  made their strongest gains since early July, Wall Street was nevertheless set to open lower on Tuesday, according to index futures ESc1 1YMc1.
Earlier there were three volatile trading days in which bond yields soared and stocks racked up heavy losses, chiefly on concern the era of supercharged monetary stimulus could be coming to an end and Brainard's words followed and what would be the last from a Fed official before the U.S. central bank's September policy meeting.
According to the CME Group's FedWatch tool, futures traders cut the chances of a Fed rate hike at the Sept 20-21 meeting to just 15 percent from 21 percent.
"Risk sentiment is a bit more stable today but generally there is this doubt. U.S. stocks futures are down in contrast to European markets. That is on the back of rising uncertainties about central banks' ability to stimulate their economies and of course the speculation that the Fed is getting closer to a rise in rates," said Manuel Oliveri, a strategist at Credit Agricole in London.
The disappointment that the European Central Bank did not signal an extension of its bond-buying stimulus program at its meeting last Thursday was another trigger for the turmoil of the last few days.
Apart from pushing up yields in Japan, the United States and elsewhere, that helped push up yields on government bonds in the euro zone, many of which were negative.

For the first time since the day after Britain's June 23 vote to leave the European Union, the German 10-year yields, the euro zone benchmark, tuned positive on Monday. Down 2.8 basis points on the day, they fell back to zero and last stood at 0.012 percent on Tuesday.
U.S. 10-year Treasury yields dipped 1 bps to 1.66 percent.
"This rebound looks weak to me, and lacking in conviction. The economic environment in Europe is still not that good," said Terry Torrison, managing director at Monaco-based McLaren Securities.
There was a 0.2 percent dip in MSCI's broadest index of Asia-Pacific shares outside Japan. Japan's Nikkei closed up 0.3 percent.
Recent data showed that China's industrial output grew at its fastest rate in five months in August while retail sales and investment last month also beat forecasts, but that data was largely shrugged off by the markets.
"We've had a number of supportive comments from the policy hawks, but they are still struggling to convince the market. The dollar is right in the middle of the recent ranges," said Neil Mellor, a strategist for Bank of New York Mellon in London.

Christopher J. Mitchell

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