U.S. shares gain, European shares dip on Fed rate hike bets

Mon Aug 29, 2016 4:25pm EDT
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By Sam Forgione

NEW YORK (Reuters) - U.S. stock markets climbed on Monday while European share markets slipped in the wake of comments by top Federal Reserve officials that bolstered expectations for an interest rate hike by the U.S. central bank this year.

Fed Chair Janet Yellen said on Friday the case for a rate increase was strengthening, but provided little detail on when the Fed would next move. Vice Chair Stanley Fischer suggested on CNBC that a rate hike as soon as next month was possible.

The advance in the U.S. stock markets was led by financials, which stand to gain the most in an environment of higher interest rates. The S&P 500 financial index .SPSY ended 1 percent higher; Wells Fargo (WFC.N: Quote) gained 2.2 percent and JPMorgan (JPM.N: Quote) rose more than 1 percent. The advances helped Wall Street snap a three-day losing streak.

A report from the U.S. Commerce Department showed consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose for a fourth month in July. That reinforced bets of a rate rise soon, even as other data showed U.S. inflation remained subdued.

The dollar pared gains against the yen after extending Friday's rise and reaching a roughly three-week high of 102.39 yen JPY= in early trading.

European shares responded unfavorably to the rising expectations for a 2016 Fed rate hike, with the pan-European STOXX 600 index .STOXX ending down 0.15 percent. British markets were closed for a holiday.

"The market's getting more comfortable with the idea that the Fed is going to raise rates this year," said Chris Zacarelli, chief investment officer at Cornerstone Financial Partners.

MSCI's all-country world equity index .MIWD00000PUS was last down 0.04 points, or just 0.01 percent, at 418.38.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., August 25, 2016. REUTERS/Brendan McDermid