Global stocks sink on Fed rate hike expectations

But the liftoff is surrounded by a contentious debate.

“Given the recent volatility in the financial markets, the Federal Reserve is expected to hold rates steady at its upcoming FOMC meeting”, the analysts said.

The August employment report was supposed to settle the matter once and for all. Being a commodity exporter, Russian Federation may also see some pressure on its markets.

Wage growth has proven more elusive than job creation. Nothing was resolved.

So traders remain on edge, with no consensus when the Fed will pull the trigger. Markets are more uncertain than ever.

Each new piece of data is an “indication and warning” of whether the hypothesis is getting stronger or weaker. With this in mind, we believe that investors should start looking for opportunity to sell the Australian dollar.

In our view, the Fed is in a lose-lose situation. The number of American jobs has increased, but it is the quality of those jobs that is in question. This is the benefit of our analytic method.

China’s slowdown is likely to be a key worry for the Fed and a 14 percent drop in Chinese imports over the past year, the tenth straight monthly drop, along with an annual factory gate price deflation of almost 6 percent, does not help rate hike arguments.

Interest rate hawks argue that raising rates from their very low level will not adversely affect commerce because the rise will be so small it will have no impact. Wage growth, at 2.2%, has scarcely risen in four years and remains well below levels reached during the previous three recoveries. Here the story is not good. Core PCE is the Fed’s preferred inflation measure.

So the data are a mixed bag. Some see it as directly equivalent to a rate hike.

This pushes Yellen further away from her inflation goal.

“Higher rates are always an incremental negative for the stock market”, Bernstein wrote.

CURRENCIES: The euro fell 0.3 percent to $1.1257 while the dollar was flat at 120.68 yen.

I don’t expect the Fed to raise rates, but it can not be ruled out. During the speech, Taylor looked toward Kocherlakota, a proponent of the Fed holding interest rates down through the end of the year.

This is more of the same.

Are they right? Is the 6 year plus long bull market over?

Wall Street has been moving the goalposts all year. Then June. Then September.

It has become the norm after a Fed meeting for stocks to be volatile, often changing direction various times between the time of the statement and the market close a couple hours later.

If the Fed isn’t going to do the first, the only choice it has, it would seem, is to do the second. It is that close for the September policy meeting. There’s a depressing lesson politicians may derive from all this – the accommodative Fed that makes deficit reduction a pro-growth policy may be a thing of the past.

But, the Fed might hint at an October rate increase.

But market participants say they’ve already priced in that rate hike, and its exact timing will not shake their long term bets. The Fed went so far as to rehearse an impromptu teleconference with journalists.

“The focus on the Fed is extraordinary”, Josh Bivens, director of Research and Policy at Economic Policy Institute, said on the conference call.

“I would be more concerned if they did not raise rates, because that would be a sign of maybe slowing economic activity”, said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “While there could be a knee-jerk selloff across emerging markets, India would likely emerge as a relative value, given the support for equities due to the volatility in China’s equity market and in bonds with the S&P downgrading Brazil to junk”, BofA-ML said in a notre.