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GLOBAL MARKETS-Rate hike concern weighs on stocks; crude oil up

Published 2016-05-17, 04:33 p/m
© Reuters.  GLOBAL MARKETS-Rate hike concern weighs on stocks; crude oil up
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* Wall St lower as strong data raises chances of rate hike
* U.S. oil futures hit 7-month high
* Dollar slips vs basket of currencies

(Updates prices, changes comment)
By Rodrigo Campos
NEW YORK, May 17 (Reuters) - A global gauge of stocks fell
on Tuesday, weighed down by Wall Street on concerns that strong
U.S. inflation data could bring closer an expected rate hike
from the Federal Reserve.
The U.S. dollar, expected to strengthen if the Fed tightens
monetary policy, was little changed. Crude oil futures touched
multi-month highs.
A Fed policymaker said he will push for an interest rate
hike in June or July and two others still see up to three rate
increases this year, leaving the door open to a change in
monetary policy relatively soon.
U.S. consumer prices recorded their biggest increase in more
than three years in April, while housing starts rose more than
expected last month.
"The equity market is taking cues from stronger data and
some of the comments from Fed members in terms of maybe hiking
more than is priced into the market," said Patrick Maldari,
senior fixed income investment specialist at Aberdeen Asset
Management in New York.
Traders now see the probability of a rate hike after the
Fed's November meeting at 58 percent, up from roughly 42 percent
on Monday, according to the CME FedWatch tool.
On Wall Street, stocks were led lower by the more defensive,
high-dividend paying sectors, which tend to be sold when more
investors expect higher rates.
The Dow Jones industrial average .DJI fell 180.73 points,
or 1.02 percent, to 17,529.98, the S&P 500 .SPX lost 19.45
points, or 0.94 percent, to 2,047.21 and the Nasdaq Composite
.IXIC dropped 59.73 points, or 1.25 percent, to 4,715.73.
The S&P all but erased its gain for this year.
The pan-European FTSEurofirst 300 share index .FTEU3 ended
down 0.03 percent, while MSCI's gauge of stocks across the globe
.MIWD00000PUS fell 0.32 percent.
In the currency market, the British pound rose as much as
0.9 percent to $1.4524 GBP= , helped in part by a report that
the "In" campaign held a 15-point lead over rival "Out" ahead of
Britain's June 23 referendum on European Union membership. It
was last up 0.4 percent at $1.4457.
The dollar index hovered near unchanged as traders doubted
the U.S. inflation data was enough to push the Fed closer to
tightening policy. The yen JPY= was down 0.06 percent versus
the greenback at 109.07 per dollar and the euro EUR= was
little changed at $1.1314.
"If you are a hawk, you could see the CPI as being higher.
But in reality, the numbers were pretty much on consensus," said
Richard Scalone, co-head of foreign exchange at TJM Brokerage in
Chicago, in reference to Fed policymakers considered "hawks" for
favoring tighter monetary policy.
Yields for two-year Treasury notes US2YT=RR rose as high
as 0.831 percent on the strong inflation data, their highest
since April 27. Three-year notes US3YT=RR hit their highest
since April 28, touching 0.981 percent.
Benchmark 10-year notes US10YT=RR fell 3/32 in price to
yield 1.762 percent, up from 1.753 percent on Monday.
U.S. crude prices hit seven-month highs on expectations of
lower U.S. stockpiles. U.S. oil CLc1 touched $48.60, the
highest since mid-October, and was recently up 1.7 percent at
$48.55.
Brent crude LCOc1 hit $49.59 per barrel, a more than
six-month high, and last traded at $49.46, up 1.0 percent on the
day.
Copper CMCU3 ticked up 0.3 percent to $4,657 per tonne.
Spot gold XAU= was up 0.4 percent at $1,278.66 an ounce.

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