Market Commentary | Investors digest latest Fed pronouncements

European shares traded in negative territory on Monday, as top Federal Reserve officials bolstered expectations for a US rate hike this year, while a bank holiday in London set the tone for a quiet day of trading. Shares in Asia closed mixed, and US markets opened moderately higher on Monday, shaking off three days of losses.

In Germany, the DAX 30 slid 0.38% and France’s CAC 40 shed 0.45%. The London Stock Exchange was closed for a summer bank holiday. Among gainers, shares in Alstom rose 3% after the French transport group signed a €1.8 billion deal to design and build 28 new high-speed trains for US rail operator Amtrak.

Oil has been on something of a wild ride in recent months. After rising as much as 20% this month, investors cut their bearish bets on the commodity for the second week in a row. On Monday, a barrel of West Texas Intermediate was trading at $46.93, with concerns over Iran's production plans weighing on prices ahead of next month's planned OPEC meeting.

Shares of utilities and materials companies rose the most. Herbalife stock was up 3.3% after activist investor Carl C. Icahn, the company’s largest shareholder, said late on Friday that he had increased his stake in the nutritional supplement company. Energy companies were the one weak spot as the price of oil turned lower.

Federal Reserve chairwoman, Janet Yellen, made comments on Friday that were bullish on the economy, but gave no timetable for future rate increases. That increased speculation that an interest-rate increase was more likely this year. Low interest rates in recent years are credited for helping stock markets hit record highs, so the prospect of higher rates set off worries among some investors.

The market is currently pricing in a 30% probability of a rate increase at the September Fed meeting and an almost 44% chance for it happening in December, according to the CME Group FedWatch tool.

Meanwhile, in Japan, Bank of Japan Governor Haruhiko Kuroda said this weekend that the central bank will take additional monetary easing measures “without hesitation” to achieve its inflation target. Kuroda said the BoJ does not intend to shift its 2% inflation target either lower or higher. His words echo Janet Yellen’s, who also said at Jackson Hole that the Fed is not considering changing its 2% inflation objective. Focus will now turn to Friday’s non-farm payroll data for August.

This article was issued by Rebecca Naudi, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.