Stocks little changed as investors cautious over Fed hike prospects

Oil dips as Iran says no to freeze output

NEW YORK, May 23, (Agencies): Short-dated US Treasury yields inched up on Monday while global stock markets were little changed as investors weighed the possibility that US interest rates could soon rise.

Commodities were weak across the board. Oil prices fell and were on track for a fourth session of losses as investors worried about global supply, while copper fell toward threemonth lows hit last week.

In the United States, an imminent rise in interest rates was looking more probable. The Federal Reserve will likely tighten policy a bit more quickly in 2017 than this year, by perhaps one or two more rate hikes, San Francisco Fed President John Williams said on Monday.

St Louis Fed President James Bullard said a relatively tight labor market in the United States may put upward pressure on inflation, raising the case for higher interest rates.

The Fed surprised investors when the central bank’s meeting minutes released last week opened the door to a rate hike as early as in June.

Topping the agenda this week is whether US economic data adds to the likelihood of a June or July rate increase.

MSCI’s all-country world stock index was flat, while the US S&P 500 index was also little changed.

“The market will be pretty rangebound until we get a better sense of what’s happening with the Fed,” said Adam Sarhan, chief executive of Sarhan Capital in New York.

“Right now, we’re getting a lot of cross currents from the central bank and investors are looking for more direction with (Fed chief Janet) Yellen speaking on Friday.”

Short-dated US Treasury yields edged up, with the two-year yield hovering at its highest in two months on Fed rate-hike bets.

The Dow Jones industrial average was up 37.05 points, or 0.21 percent, to 17,537.99, the S&P 500 had gained 0.38 point, or 0.02 percent, to 2,052.7 and the Nasdaq Composite had added 9.26 points, or 0.19 percent, to 4,778.82.

The pan-European FTS Euro first 300 index of leading regional stocks ended down 0.5 percent.

Shares of Monsanto. were up 5.1 percent in afternoon New York trading after Bayer unveiled a $62 billion bid for US seeds company Monsanto. Bayer AG weighed on the European market.

Investors also digested economic data that showed euro zone private sector growth in manufacturing and services slowing a little in May, even though Germany continued to power ahead.

In currency markets, the US dollar slipped against the yen on Japanese trade data and US resistance to currency intervention from Tokyo.

The dollar was down 0.9 percent against the yen, while the dollar index, which measures the greenback against a basket of six major rivals, was last down 0.1 percent.

US

The S&P 500 and Dow trimmed gains and were little changed in early afternoon trading on Monday, while a bounce in Apple’s stock kept the Nasdaq in positive territory.

The benchmark Philadelphia SE Semiconductors Index was up 1 percent, following a 3.2 percent rise on Friday, after a report that the iPhone maker had asked its suppliers to prepare 72-78 million units, above the market’s expectation of 65 million units.

Apple’s shares rose 1.44 percent to $96.58.

However, oil slid as Iran vowed to ramp up output and rig reductions paused in the United States, pulling down oil major Exxon by 0.6 percent.

Investors are awaiting speeches by several US Federal Reserve officials this week for further clues on the trajectory of rate hikes, with Fed Chair Janet Yellen set to speak on Friday.

The Fed surprised investors when the central bank’s minutes released last week opened the door to a rate hike in June, roiling financial markets.

San Francisco Fed President John Williams and his St Louis counterpart, James Bullard, took a hawkish stance in separate appearances on Monday, hinting at more than one rate hike this year.

The probability for a June rate hike rose to 30 percent on Friday from about 4 percent at the start of the week, according to CME Group’s FedWatch site.

“The market will be pretty range bound till we get a better sense of what’s happening with the Fed,” said Adam Sarhan, chief executive of Sarhan Capital in New York.

“Right now, we’re getting a lot of cross currents from the central bank and investors are looking for more direction with Yellen speaking on Friday.”

At 12:36 pm ET (1636 GMT) the Dow Jones industrial average was up 12.06 points, or 0.07 percent, at 17,513, the S&P 500 was down 1 points, or 0.05 percent, at 2,051.32 and the Nasdaq Composite was up 7.34 points, or 0.15 percent, at 4,776.89.

Six of the 10 major S&P sectors were lower, with the telecom index’s 0.46 percent fall leading the decliners.

Europe

European stock markets retreated Monday following a largely downbeat performance by Asia, as Wall Street trod water.

“It was a directionless start to the new week for European markets as investors digested more hawkish Fed speak, a drop in the price of oil, improved French and German economic data and another mega-merger facing regulatory headwinds,” said Jasper Lawler at CMC Markets UK.

European stocks have pitched back and forth over the past week as investors have begun to take more seriously the probability the US Federal Reserve could raise interest rates in June.

Yoav Nizard at FXCM currency brokerage said the “market is indecisive, torn between a possible increase in rates by the Federal Reserve and expectations of new supportive measures from the ECB following increased deflationary risks in the eurozone”.

Moreover, “the drop in oil prices puts under pressure European stock exchanges which do not gain from a weak euro,” he added.

Monday’s big corporate news came from German drugs and chemicals giant Bayer, which said it had offered $62 billion (55 billion euros) for US agriculture group Monsanto as it seeks to create the world’s biggest supplier of seeds, pesticides and genetically-modified crops.

Bayer shares fell 5.7 percent to 84.42 euros on Frankfurt’s DAX 30 index, which closed down 0.7 percent.

Monsanto shares climbed 4.9 percent to $106.52 in trading on Wall Street.

London’s benchmark FTSE 100 index eased 0.1 percent after the government warned Monday in a report that Britain could be plunged into a year-long recession and lose hundreds of thousands of jobs if it voted to leave the EU next month.

Meanwhile the Paris CAC 40 shed 0.7 percent, with AXA also dropping 0.7 percent after it became the first global insurer to cut ties with the tobacco industry, saying it would sell about 1.8 billion euros worth of investments in the sector.

■ Key figures around 1530 GMT London — FTSE 100: Down 0.1 percent at 6,147.53

Frankfurt — DAX 30: Down 0.7 percent at 9,842.29

Paris — CAC 40: Down 0.7 percent at 4,325.10

EURO STOXX 50: Down 0.9 percent at 2,936.85

Asia

Asian stock markets moved cautiously Monday as investors sat tight awaiting fresh news about a possible US rate rise and after G7 finance ministers pressed Japan not to weaken its currency.

Global stocks had rallied in the previous session despite talk that the US Federal Reserve could raise interest rates in June, but analysts expect some market volatility ahead of further indicators.

A stronger yen weighed on Tokyo exporters after G7 finance ministers clashed over the weekend on whether Japan should intervene to stem the rise of its currency.

Sydney shed 0.6 percent and Hong Kong closed down 0.2 percent. But Shanghai ended 0.6 percent higher and Seoul ticked up 0.4 percent.

US benchmark West Texas Intermediate was down 0.85 percent at $47.75 and Brent crude was trading 0.8 percent lower at $48.33.

Energy firms were among those hit, with Sydney-listed Worley Parsons sliding 3.7 percent and Japanese explorer Inpex slumping 2.2 percent.

But Taipei-listed Apple suppliers got a boost Monday after a report the smartphone maker has placed a bullish order for its iPhone 7 series, telling suppliers to kickstart production.

iPhone assembler Pegatron surged 9.9 percent while Catcher Technology — which provides metal casing for Apple handsets — jumped 9.7 percent.

Top chipmaker Taiwan Semiconductor Manufacturing (TSMC) and components manufacturer Hon Hai Precision Industry also rose.

Tokyo stocks closed down 0.5 percent after the dollar fell against the yen and after Japan published fresh data showing exports faltered in April.

■ Key figures around 0845 GMT Tokyo: Nikkei 225: Down 0.5 percent at 16,654.60 (close)

Shanghai — Composite: Up 0.6 percent at 2,843.65 (close)

Hong Kong — Hang Seng: Down 0.2 percent at 19,809.03 (close)

Oil

Oil prices slipped Monday after Iran said it had no plans to join any output freeze by other major producers.

Despite a recent rebound, world crude prices are still at less than half of their levels of June 2014 because of a supply glut, partly fed by Iran’s return to world markets in January after the lifting of nuclear-linked Western sanctions.

“The government has no plans for the time being to freeze or interrupt its increase in oil output and exports based on plans that are being carried out,” National Iranian Oil Co managing director Rokneddin Javadi told Iran’s Mehr news agency, according to Bloomberg News.

Tehran’s stance appeared to reinforce market doubts that the Organization of the Petroleum Exporting Countries (OPEC) — of which Iran is a member — will take any firm action to curb oversupply at its next meeting in Vienna on June 2.

Last month, talks in Doha involving OPEC members and other major producers such as Russia had already failed to reach a deal to cap production.

At about 1700 GMT, US benchmark West Texas Intermediate for delivery in July was down 65 cents at $47.76 a barrel. Brent North Sea crude for July shed 74 cents to $47.98.

CMC Markets senior sales trader Alex Wijaya told AFP the news out of Iran dashed rising confidence among traders prompted by a tightening of the supplydemand equation, with US output steadily falling and Nigeria and Canada suffering temporary cutbacks.

Gold

Gold dipped to a 3-1/2 week low on Monday, as the dollar firmed and expectations rose that the US Federal Reserve will hike interest rates as early as June.

Bullion has been under pressure since the Fed last week released the minutes of its April meeting, which showed officials believe the US economy could be ready for another interest rate increase next month.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

Spot gold fell to $1,242.63 an ounce, the lowest since April 28, in earlier trade and was down 0.5 percent at $1,245.99 an ounce at 1412 GMT. US gold futures also dipped 0.5 percent to $1,246.80.