World stocks plunge on oil, Fed worries

An elderly Chinese man walks past display boards showing the latest stock prices at a brokerage in Beijing yesterday. Asian stocks fell yesterday after a US Federal Reserve official suggested a September interest rate hike still was possible and Japanese factory activity weakened. —AP

An elderly Chinese man walks past display boards showing the latest stock prices at a brokerage in Beijing yesterday. Asian stocks fell yesterday after a US Federal Reserve official suggested a September interest rate hike still was possible and Japanese factory activity weakened. —AP

NEW YORK: World stock indexes fell while oil prices dropped yesterday amid persistent investor concerns about slowing growth in China and the prospect of higher US interest rates. US stocks were poised for their worst monthly drop in more than three years on worries about the health of China’s economy and the timing of a US interest rate hike. All three major indexes slipped more than 1 percent yesterday after weekend comments from Federal Reserve Vice Chairman Stanley Fischer appeared to keep the door open for a rate hike in September. The No 2 Fed official said US inflation would likely rebound as pressure from the dollar fades, allowing the Fed to raise interest rates gradually.

Fischer’s remarks at the global central banking conference in Jackson Hole, Wyoming suggest the Fed could look beyond a week of stock market turmoil brought on by persistent fears that China’s economy is faltering. “We can still expect to see some significant drops in the market till we get some direction from the Fed regarding a rate increase,” said John DeClue, chief investment officer of US Bank Wealth Management. The dollar eased as weaker stock markets prompted investors to trim bets against currencies popularly used to fund risky carry trades. But the dollar’s losses were limited by weekend comments from Federal Reserve policymakers that left the door open to a US rate rise as soon as next month.

The US dollar index, which measures the greenback against a basket of currencies , was down 0.1 percent. “The market turmoil will continue in the near future. China is the catalyst, but the real reason for the selloff is the nervousness about the first US rate hike,” KBC senior economist Koen De Leus said. At 10:30 am (1430 GMT), the Dow Jones industrial average was down 114.72 points, or 0.69 percent, to 16,528.29, the S&P 500 had lost 13.24 points, or 0.67 percent, to 1,975.63 and the Nasdaq Composite had dropped 28.79 points, or 0.6 percent, to 4,799.53. The pan-European FTSEurofirst 300 stocks index fell 0.3 percent and, even though it has recouped all of last week’s losses, was on track for its worst monthly performance since August 2011. Germany’s DAX was down 0.6 percent.

Brent crude oil fell back below $49 a barrel after its biggest two-day rally in six years last week. Chinese shares had another volatile session. The CSI300 index ended up 0.7 percent, after falling 4 percent at one point. The index was still down 11.8 percent for August.

FED UNCERTAINTY The uncertainty about when the Fed might raise rates kept yields on German government bonds, the euro-zone benchmark, close to last week’s highs. Ten-year yields were marginally higher at 0.74 percent. In the US bond market, benchmark 10-year Treasuries notes were up 9/32 in price to yield 2.154 percent. In the oil market, Brent was down $1.07 a barrel at $48.98 and, despite last week’s gains, heading for its fourth consecutive monthly decline. US crude was down 87 cents at $44.35. Gold struggled over the Fed outlook, trading around $1,131.80 an ounce. — Reuters

This article was published on 31/08/2015