Stocks dip, yields inch up on Fed rate hike talk

Mon May 23, 2016 4:44pm EDT
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By Caroline Valetkevitch and Saqib Iqbal Ahmed

NEW YORK (Reuters) - Global stock markets edged lower while short-dated U.S. Treasury yields held near two-month highs on Monday as investors weighed the possibility that U.S. interest rates could soon rise.

Commodities were mostly lower. Oil prices fell for a fourth session in a row as investors worried about global supply, while gold declined to a 3-1/2-week low.

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, boosting 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 U.S. economic data adds to the likelihood of a June or July rate increase.

MSCI's all-country world stock index .MIWD00000PUS was down 0.2 percent while U.S. stocks also ended slightly lower.

"The market needs to be coddled and gently eased into a slightly higher interest-rate environment, and that appears to be what the Fed is doing," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 16, 2016.  REUTERS/Brendan McDermid