Chances for US interest rate hike rose twofold this week - 3.3.2017

US stocks retreat after rally

US stocks closed lower on Thursday with financials showing the most weak daily performance since January 30. S&P financials tumbled 1.5%. US dollar index, a measure of a greenback’s value against a basket of six major currencies, added 0.4%. Caterpillar stocks lost ground on the news the federal officials searched its Illinois facilities. Its shares slumped 4.3% to $94.36 which negatively affected the Dow and the S&P500. US markets rallied on Wednesday with no real justification for such a strong rally on expectations the Fed will hike interest rates in March. S&P 500 and Nasdaq composite recorded their best day since November elections in the US so the market was overdue for a correction. S&P 500 index fell 0.59% to 2,381.92 on Thursday. Dow Jones industrial average lost 0.53% to 21,002.97 while Nasdaq dipped 0.73% to 5,861.22. The Fed Chair Janet Yellen will speak on Friday and may shed some light on interest rate hike timing. The next policy meeting is scheduled on March 14-15. Now traders price in the 74%-chances of the Fed rate hike in March up from 30% at the start of this week. As for the economy, the jobless claims dropped to a 44-year low last week which means further tightening of the labour market.

European indices dip on weak corporate news

European stocks slipped on Friday on weak corporate news and higher chances for the Fed rate hike. The pan-European STOXX 600 index lost 0.3% having climbed to its 15-month high the day before. WPP stocks tumbled about 7% on the news this global advertising giant had a slow start to 2017 and has conservative plans for this year. Another company which weighed on European stock indices was Berendsen which slumped 16.7% after the release of its weak financial results. Across Europe, German DAX 30 index lost 0.3% while British FTSE 100 index dipped 0.2%.

Asian stocks follow Wall Street

Japanese stocks suffered losses on Friday as investors booked profits ahead of the weekend having hit a 14-month high a day before on redoubled chances for the Fed rate hike in March. Nikkei lost 0.5% to 19,469.17 having previously hit the high of 19,668.01 on Thursday. The broader Topix dipped 0.4% to 1,558.05. USDJPY stood at 114.18 yen. In Hong Kong, the Hang Seng index slid 0.6% to 23,581.09 points. Chinese stocks also fell on Friday in anticipation of an annual parliament meeting. The blue-chip CSI300 index dipped 0.3% to 3,425.52 points while Shanghai Composite index declined 0.4$ to 3,217.98 points. Australian shares dipped on Friday following the steps of Wall Street with materials and financials leading the selloff. The S&P/ASX index slid 0.8% to 46.588 points which was its biggest daily loss in a month. All its major sectors traded in negative territory except for telecoms. Global miners Rio Tinto and BHP Billiton tumbled 4.1% and 1.4% respectively. Materials fell on lower commodity prices while financials were shadowing Wall Street.

Oil advances on retreating US dollar

Brent oil futures prices added 0.4% to $55.29 a barrel having lost 2.3% the day before. WTI futures advanced 0.3% to $52.77.

Gold set to close this week lower

Gold may show a record weekly decline in four months as chances for the Fed rate hike in March rose more than twofold this week. Spot gold lost 0.5% to $1,228.68 an ounce while US gold futures for April delivery fell $4.10 to $1,228.80. Traders anticipate the Yellen’s speech later today in which she may support the case for the interest rate hike. The bullion is highly sensitive to the interest rate as it is a non-yielding asset. Among other precious metals, silver lost 0.2% to $17.73 having slumped 3.5% a day before. Palladium dropped 0.4% to $763.85.