Investing.com - Here are the top five things you need to know in financial markets on Thursday, May 19:
1. Odds for Fed rate hike in June surge
Odds for a June rate hike by the Federal Reserve surged following the release of hawkish Fed minutes, which indicated that “most” of the central bank’s members are ready to raise rates if economic data points to stronger second-quarter growth as well as firming inflation and employment.
Fed funds futures were signaling a 34% chance of a June rate hike by Thursday morning, compared to 16% before the release of the Fed minutes Wednesday afternoon and up sharply from just 4% a week ago.
Market players will pay close attention to comments from a pair of key Fed officials later Thursday. Fed Vice Chair Stanley Fischer speaks at 13:15GMT, or 9:15AM ET, at an event at Columbia University, while New York Federal Reserve President William Dudley will hold a press briefing on the economy at 14:30GMT, or 10:30AM ET.
Besides the Fed speakers, traders will be watching closely when weekly jobless claims are released at 12:30GMT, or 8:30AM ET, after last week's surprising jump. The Philadelphia Fed survey is also released at 8:30AM.
2. Dollar climbs to 7-week highs
The growing possibility of a June rate hike lifted the dollar to a seven-week high against its major counterparts. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, hit 95.33, the most since March 29 and was last at 95.15.
The greenback dipped against the yen but held near a three-week high of 110.38 hit overnight, while the euro traded near 1.1220, after falling to 1.1206, its lowest since late March.
3. Global stocks sink amid Fed rate hike jitters
U.S. stock futures pointed to a lower open on Thursday, as market players scrambled to factor in the possibility of another interest rate increase by the Federal Reserve as early as June.
Major U.S. companies reporting Thursday include Wal-Mart (NYSE:WMT), Dick’s Sporting Goods Inc (NYSE:DKS) and Advance Auto Parts Inc (NYSE:AAP) before the bell, while Gap Inc (NYSE:GPS), Applied Materials (NASDAQ:AMAT) and Ross Stores (NASDAQ:ROST) will report after the bell.
Elsewhere, European stock markets fell sharply, with Germany’s DAX down almost 1.5%, as renewed expectations for a June rate hike by the Federal Reserve weighed and as declining oil prices also affected the energy sector.
Earlier, shares in Asia closed mostly lower, as many investors grow cautious about the stronger chance that U.S. interest rates will rise in June.
4. Oil prices pull back from 7-month highs
Oil prices were under heavy selling pressure on Thursday, pulling back from the prior session’s seven month highs, as a broadly stronger U.S. dollar and an unexpected rise in U.S. crude inventories triggered selling.
U.S. crude was down $1.00, or 2.08%, to $47.19 a barrel by 9:55GMT, or 5:55AM ET, while Brent dropped $1.17, or 2.39%, at $47.76.
The U.S. Energy Information Administration said in its weekly report that crude oil inventories unexpectedly rose by 1.31 million barrels last week to 541.3 million. Market analysts' expected a crude-stock decline of 2.833 million barrels
5. Metals sell off
Gold futures sank to a three-week low on Thursday, after the minutes of the Federal Reserve's latest policy meeting suggested a rate hike could come in June. The precious metal is sensitive to moves in U.S. rates, as a rise would lift the opportunity cost of holding non-yielding assets such as bullion.
Gold was down $19.20, or 1.5%, to $1,255.25 a troy ounce during morning hours in New York.
Elsewhere on the Comex, silver futures for July delivery dropped 46.2 cents, or 2.7%, to $16.67 a troy ounce, a level not seen since April 19, while copper futures declined 2.5 cents, or 1.2%, to hit a three-month low of $2.054 a pound.
A stronger dollar reduces demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.