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Federal Reserve eager to hike rates : 31.05.2016 by IFC markets

US markets were closed for Memorial Day on Monday. The dollar hit a one month high against the yen yesterday on the back of heightened expectations of a rate hike in June after Federal Reserve Chair Janet Yellen said on Friday it would be appropriate for the Fed to raise rates gradually in coming months if the economy and the labor market continued to improve. St. Louis Fed President James Bullard, speaking at the Bank of Korea conference yesterday, also expressed his support for a rate hike, saying global markets appear to be "well-prepared" for a summer rate hike. The dollar ended little changed: the live dollar index data indicate the ICE US Dollar Index, a measure of the dollar’s value against a basket of six major currencies, closed at 95.689 compared with Friday’s close at 95.728. Traders will be watching closely the important jobs report on Friday and the Institute for Supply Management survey results on Wednesday. A strong nonfarm payrolls reading for May will strengthen rate hike expectations: fed fund futures traders are currently pricing a 28% likelihood for a June rate hike and 61% for a hike at the July 26-27 policy meeting, according to CME's FedWatch tool. US stock indices futures are pointing to a higher opening today. At 14:30 CET April Personal Income, Personal Spending and Personal Consumption Expenditure will be released today. The tentative outlook is positive. And at 15:00 CET March S&P/Case-Shiller US House Price Index will be published. The outlook is positive. At 15:45 CET May Chicago PMI will be released. The tentative outlook is positive. At 16:00 CET May Conference Board Confidence Index will come out. The tentative outlook is positive.

European stocks closed higher on Monday in a thin trading as London and US markets were closed for public holidays. The euro ended higher against the dollar after hitting a two month low of $1.1097. The Stoxx 50 index closed up 0.38%. German DAX 30 index rose 0.5% to 10333.23. France's CAC 40 gained 0.3% as data indicated French GDP grew at a higher than expected 0.6% rate over previous quarter following 0.5% rise in fourth quarter of 2015. In other economic news, German consumer price index rose 0.1% year over year in May after a 0.1% decline in previous month. Today German Unemployment Rate for May came in at 6.1% seasonally adjusted, 0.1% lower than in the previous month, and Retail Sales growth in April at 2.3% year-over-year was considerably higher than the expected 1.7% rise after an 0.6% gain in March. At 11:00 CET January euro-zone Unemployment Rate and Inflation will be released. The tentative outlook is negative for euro.

Asian stocks are advancing today. China’s Shanghai Composite Index is up 2.6%, the biggest intraday move since March, on news that MSCI will likely add mainland-traded Chinese stocks called A-shares in its Emerging Markets Index in mid- June. MSCI’s inclusion of A-shares into the index will support share prices as funds start buying these shares. Nikkei rose for the fifth session in a row gaining 1% today as yen weakened against the dollar on higher expectations of US interest rate hike, supporting exporter shares. Early in the session data indicated Japanese industrial output unexpectedly rose 0.3% in April despite weak exports and the negative impact of disruptions caused by earthquakes in southern island of Kyushu.

Oil futures prices are mixed today with West Texas Intermediate crude rising with the start of the US summer driving season while Brent futures are edging lower on reports of rising crude exports from Middle East. Prices ended little changed yesterday with July Brent crude rising 0.2% to $50.05 a barrel on London’s ICE Futures exchange as traders awaited the start of Petroleum Exporting Countries meeting Thursday. Major oil producers have been increasing output after the collapse of prices nearly two years ago aiming to defend their market shares. Iraq announced it will supply 5 million barrels of extra crude to its partners in June joining major producers like Saudi Arabia, Kuwait, Iran and the United Arab Emirates which plan to raise supplies in the third quarter in an attempt to increase their market share in Asia.

 

Source: http://www.ifcmarkets.com

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