Global stocks near 13-month highs, yields down as Fed hike bets wane

Wed Sep 7, 2016 2:48pm EDT
 
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By Chuck Mikolajczak

NEW YORK (Reuters) - A gauge of global equity markets moved to a near 13-month high on Wednesday and U.S. Treasury yields fell for a second straight session as expectations for a rate hike by the U.S. Federal Reserve this year continued to fade.

A weaker-than-expected August employment report on Friday and Tuesday's soft data on the services sector have crimped expectations the Fed will boost interest rates when it meets next week and for the rest of the year.

The probability for a rate hike in September stands at 15 percent, according to CME's FedWatch tool, while expectations for a hike in December have fallen back below 50 percent. Investors had been pricing in greater chances of a rate hike this year after hawkish comments from several Fed officials.

The Federal Reserve is scheduled to release its Beige Book - a summary of commentary on economic conditions - at 2 p.m. EDT (1800 GMT) on Wednesday. That will be parsed by investors for rate-hike clues.

"We've had three to four pieces of relatively disappointing economic data, so that puts some focus on today's Beige Book," said Art Hogan, managing director of Wunderlich Equity Capital Markets.

The Dow Jones industrial average .DJI fell 37.8 points, or 0.2 percent, to 18,500.32, the S&P 500 .SPX lost 2.88 points, or 0.13 percent, to 2,183.6 and the Nasdaq Composite .IXIC added 0.34 points, or 0.01 percent, to 5,276.25.

U.S. stocks were led lower by the consumer staples sector .SPLRCS, off 0.8 percent. General Mills (GIS.N: Quote) shares lost 2.9 percent to $68.86 after the company said its first-quarter organic net sales will be below its full-year guidance range.

Emerging market shares .MSCIEF led the charge, touching their strongest levels since July 2015 as investors sought returns with interest rates likely to stay low for a prolonged period.   Continued...

 
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., August 31, 2016.  REUTERS/Brendan McDermid