Global stocks fall in light trading as dollar rises on Fed hike bets

Fri Aug 19, 2016 4:37pm EDT
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By Dion Rabouin

NEW YORK (Reuters) - Stock on major markets fell worldwide on Friday while the U.S. dollar strengthened as investors began to price in a greater likelihood that the Federal Reserve will raise interest rates this year.

European share markets posted their biggest weekly loss in two months, while U.S. stocks edged lower, led by declines in utility shares as investors weighed prospects for an interest rate increase in the coming months.

Oil prices were mixed, with Brent crude ending lower and WTI light crude rising to post its biggest weekly gain since March. WTI has surged nearly 25 percent in a little over two weeks. However analysts warned the rally was backed by speculation rather than fundamentals.

Comments from senior Fed officials in recent days that suggest a bias toward raising benchmark U.S. interest rates have pushed investors to re-examine minutes from the U.S. central bank's most recent meeting in July, analysts said.

"Even though the minutes came out on Wednesday afternoon, I suspect that participants are still digesting their contents and updating their expectations," said Carl Tannenbaum, chief economist for Northern Trust in Chicago.

San Francisco Fed chief John Williams late Thursday called for the Fed to return to monetary tightening "sooner rather than later." Those comments followed New York Fed President William Dudley who lauded recent strong gains in U.S. employment after saying earlier in the week that the Fed could raise rates as soon as next month.

Investors are now looking to an annual meeting of central bankers from around the world in Jackson Hole, Wyoming, next week, at which Fed Chair Janet Yellen is scheduled to speak, for clues on the course of monetary policy.

"I think we're due for a pause here as we look for greater clarity over the next couple of weeks," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., August 9, 2016. REUTERS/Lucas Jackson  - RTSM2SO