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Morning markets: US stocks stall as Fed increases rate rise uncertainty

Thursday, 18 Aug 2016 07:00:24 | Rebecca Hyam Rebecca Hyan

Federal Reserve Board Chair Janet Yellen speaks at a quarterly news conference. (AFP: Alex Wong/Getty Images)

Stocks in the United States limped to a flat finish overnight, as the minutes from the Federal Reserve's latest meeting showed members were divided over the timing of the next interest rate rise.

Markets at 8:45am (AEST):

  • ASX SPI 200 futures +0.1pc to 5,514
  • AUD: 76.55 US cents, 58.7 British pence, 76.6 Japanese yen, 67.8 euro cents
  • US: S&P 500 +0.2pc to 2,182, Dow Jones +0.1pc to 18,574, Nasdaq +2 points to 5,229
  • Europe: EuroStoxx 50 -1.2pc to 2,981, FTSE -0.5pc to 6,859, DAX -1.3pc to 10,538
  • Commodities: Brent crude +1.2pc to $US49.80/barrel, iron ore -1.1pc to $US61.10/tonne, spot gold +0.4pc to $US1,351/ounce

The Fed left rates unchanged last month, but said near-term risks to the economy had thinned out, clearing the way for another possible rate increase this year.

The minutes revealed that, while certain members saw justification for higher rates soon, others thought more data on the domestic economy would be needed before any decision was made.

In corporate news, some weak results from retailers Target and Lowe's weighed on sentiment.

Target cut its annual profit forecast and also lowered its estimates for sales at some of its older stores.

Its shares fell $US4.48, or 5.9 per cent, to $US71.

Home improvement chain Lowe's also cut its annual profit outlook, after reporting mixed quarterly results which included lower-than-expected earnings and weak sales.

Its share price lost $US4.77, or almost 6 per cent, to $US76.71.

Shares in Europe were sold off in the overnight session, with Germany's DAX faring the worst.

Australian shares were set for a lacklustre start with the futures index almost flat.

The Australian dollar lost ground overnight on a rise in the greenback.

IG market analyst Angus Nicholson said the US dollar yo-yoed on changing expectations around US interest rate rises.

"The US dollar had caught a bit of a bounce after Fed member Dudley had come out and emphasised the possibility of a September hike, despite copious evidence to the contrary," he wrote in his morning note.

"But the Fed minutes (released at 4:00 am AEST) provided a much more comprehensive summary of the views of different Fed members and the market seems to have been taken a bit by surprise by how dovish many of the Fed members sounded.

"There is clearly strong disagreement within the Fed with regards to the timing of further rate hikes.

"Despite some members saying that an immediate hike is appropriate, and some saying one would soon be warranted, the more cautious members of the Fed said that they would have 'ample time' to react to a rise in inflation."

Today's agenda:

Australia:
  • AMP interim result (8:00am AEST)
  • ASX FY result (8:00am AEST)
  • Brambles FY result (8:00am AEST)
  • Tatts FY results(8:00am AEST)
  • Whitehaven Coal FY (8:00am AEST)
  • Employment/ unemployment (11:30am AEST)

China:
  • House price index – July (Time TBC)

Europe:
  • Inflation – July (7:00pm AEST)

AustraliaPlus


 

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