World stocks advance after worries over Fed rate hike ease

“The possibility of a rate increase is like the Damocles sword hanging over the market”.

Over the a year ago, Brainard has been one of the Fed’s most vocal defenders of low interest rate policy, arguing the United States is vulnerable to economic troubles in Asia and Europe.

As a governor on the Fed’s board in Washington and a close ally of Chair Janet Yellen, Brainard is seen as a key figure at the central bank. That was seen as a sign the Fed will refrain from raising rates at a policy-setting meeting next week.

US RATE FOCUS: The main point of interest in markets at the moment centers on the Fed and when it will raise interest rates again. December remains the first month with at least even odds of a rate hike. Those remarks sent stocks soaring and the dollar lower in Monday trading, but Wall St has reverted to a downward bias this morning.

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

She also said that the current unemployment rate had not budged despite recently despite steady job growth of an average of about 180,000 new positions per month, suggesting that labor markets still had significant slack.

The global economy has been sputtering.

Meanwhile, Fed Governor Lael Brainard said on Monday that the Fed should avoid removing support for the US economy too quickly.

“Recent experience suggests global financial markets are tightly integrated, such that disturbances emanating from Chinese or euro-area financial markets quickly spill over to United States financial markets”, she said. The U.S. currency weakened to as low as Yen101.42 overnight. “However, the share of economists expecting more than half a percentage point of additional tightening in 2017 fell to 20 percent from 30 percent in the FT’s last survey in July”, the FT reported.

In a speech earlier Monday, Dennis Lockhart, head of the Fed’s regional bank in Atlanta, said he still held the view he expressed last month at a Fed gathering at Jackson Hole, Wyoming: That economic conditions justified consideration of a rate hike in September. Brainard also noted that annual inflation has been coming in well below the Fed’s 2 percent target.

Brainard said the USA labor market was not yet at full strength, which means “the case to tighten policy preemptively is less compelling”.

“We are continuing to move toward full employment, but that progress has been, and likely will be, somewhat gradual”, she said. And the unemployment rate has dropped to a healthy 4.9 percent. Asian stocks were mostly higher on Tuesday after a Federal Reserve board member said she was in no hurry to raise interest rates, reassuring investors who were anxious that the rate hike could pull share prices lower.