European shares climb, dollar firms on Fed hike expectations

Mon May 30, 2016 5:14pm EDT
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By Chuck Mikolajczak

NEW YORK (Reuters) - European shares reached a four-week high on Monday and the dollar index touched a two-month peak as investors braced for an interest rate hike from the U.S. Federal Reserve.

The Fed should raise rates "in the coming months" if growth picks up and the labor market continues to improve, Fed Chair Yellen said on Friday. St. Louis Fed President James Bullard chimed in, saying on Monday global markets appear to be "well-prepared" for a summer rate hike, although he did not specify a date for the policy move.

The possibility of a rate increase at the Federal Open Market Committee's June 14-15 meeting was 28 percent, according to CME's Fedwatch program. Bets on an increase at the July 26-27 policy meeting edged up to 61 percent, more than double the level of a month ago.

"The stage is set, markets are ready for the curtain to be drawn back," said Peter Kenny, senior market strategist at Global Markets Advisory Group, in Berkeley Heights, New Jersey.

"The bottom line is, with relatively hawkish commentary out of Bullard, which has been consistent, clear messaging by Chair Yellen that we should expecting a move in the next few months, markets are now well prepared and ready to embrace that."

Against a basket of currencies, the dollar was up 0.14 percent at 95.656 .DXY after climbing as high as 95.968, its highest level since March 28.

The euro zone's blue-chip Euro STOXX 50 index .STOXX50E was 0.38 percent higher at 3,125.43, while Germany's DAX .GDAXI was up 0.46 percent after hitting a one-month high.

Trading volumes were thin as the London and New York markets are closed for a public holiday.   Continued...

Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, May 30, 2016.     REUTERS/Staff/Remote