As Fed rate hike speculation eases, global stocks recover

Stocks soared Monday after an influential Fed policymaker indicated she was in no hurry to raise interest rates despite intensified speculation that the Fed is poised to tighten US borrowing rates. Brainard asked for “prudence” in the timing of rate increases. Deutsche Bank downgraded the stock to a hold rating. Policymakers signaled in June they could still hike rates twice in what remained of 2016. That was seen as a sign the Fed will refrain from raising rates at a policy-setting meeting next week.

“The market is in a downward spiral and needs to complete the pullback it began last Friday”, said Peter Cardillo, chief market economist at First Standard Financial in NY. “There are tough negotiations going on within the Fed”.

Nasdaq 100 e-minis were down 25.25 points, or 0.53 percent, on volume of 11,366 contracts. “It seems that the slump in U.S. equities last week was a bit overdone”, Toshihiko Matsuno, a senior strategist at SMBC Friend Securities Co.in Tokyo, told Bloomberg News.

Brainard’s comments appear to come amid a chorus of other Federal Reserve governors who have expressed similar cautionary sentiment and urged not rushing into another interest rate hike.

Atlanta Fed President Dennis Lockhart, however, said current economic conditions called for a “serious discussion” on rates at the September meeting, media reported. Some analysts said Rosengren’s upbeat comments have set the stage for something similar from Brainard, despite subdued data. “As the day weighed on and the Treasury auction failed to produce the results expected, we saw yields jump up and the gold market fell”, said Phillip Streible, senior market strategist for RJO Futures in Chicago.

Oil prices fell on concerns over increased USA drilling and as investor took profits on Monday’s gains of almost 1 percent.

“The dollar for the most part is on a slightly better footing than it was last week, based on some expectations that interest rates still could raise this month when the Fed meets”.

Republican Presidential candidate Donald Trump accused the Fed on Monday of keeping interest rates low because of political pressure from the Obama administration.

Strategists at USA investment bank Citigroup (NYSE: C – news) said that Italian stocks could be worth a buy, based on expectations that Prime Minister Matteo Renzi would emerge from a forthcoming referendum in a stronger position, provided that investors chose carefully. It rose $2.53, or 2.5 percent, to $108.09 after T-Mobile said preorders for Apple’s newest iPhones, introduced last week, are the strongest it has seen so far.

Viewed as an influential voice of caution within the Fed’s Washington-based board of governors, Brainard was the U.S. Treasury’s undersecretary for worldwide affairs from 2010 to 2013.