Investing.com - Here are the top five things you need to know in financial markets on Monday, August 29:
1. Odds for Fed rate hike continue to move higher
Odds for an interest rate hike from the Federal Reserve in the coming months spiked after Fed Chair Janet Yellen said Friday that the case for an increase was strengthening, while Vice Chairman Stanley Fischer indicated a tightening is possible at the next review in September.
According to Investing.com's Fed Rate Monitor Tool, investors are currently pricing in a 36% chance of a rate hike by September, up from 21% before Yellen and Fischer spoke. December odds were at around 65%, compared to 50% Friday morning.
Investors will be keeping an eye on upcoming U.S. data to gauge if the world's largest economy is strong enough to withstand a rise in borrowing costs in the weeks ahead.
The Commerce Department will release its core personal consumption expenditure (PCE) index for July, along with personal income and spending for the same month at 8:30AM ET (12:30GMT).
2. Hawkish Fed sends dollar to 2-week highs
The U.S. dollar climbed to a two-week high on Monday as investors continued to digest hawkish comments from two top Federal Reserve officials that hinted at a potential U.S. interest rate hike as early as next month.
The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, jumped to a daily peak of 95.69, the most since August 15.
It was last at 95.58 early Monday as investors began to price in a greater likelihood that the Fed will raise rates this year.
3. BOJ's Kuroda shows readiness for further easing
Bank of Japan Governor Haruhiko Kuroda said Saturday at the Fed’s symposium in Jackson Hole, Wyoming, that the central bank will take additional monetary easing measures “without hesitation” to achieve its inflation target.
Data released Friday showed that consumer prices in Japan fell by the most in three years in July, adding pressure on both the government and the BOJ to do more to boost sluggish inflation.
The dollar touched a three-week peak of 102.39 against the yen before falling back to 102.17, up 0.4% on the day (USD/JPY).
4. Global stocks creep lower on Fed rate hike bets
U.S. stock index futures pointed to a marginally lower open on Monday morning, as investors looked ahead to U.S. economic data for fresh hints on the timing of the next U.S. rate hike.
Meanwhile, European stocks slumped in mid-morning trade, after senior Federal Reserve officials indicated a U.S. interest rate increase was on the cards in the near term.
Earlier, Asian shares ended mostly lower, amid indications the Federal Reserve is gearing up to hike interest rates in the coming months.
Japan's Nikkei bucked the trend and climbed 2.3%, the biggest one-day gain in three weeks, as the yen weakened against the dollar.
5. Stronger dollar, fading supply freeze hopes weigh on oil
Oil prices fell sharply on Monday, as a broadly stronger U.S. dollar and fading hopes of a production freeze weighed on sentiment.
U.S. crude was down 73 cents, or 1.53%, to $46.91 a barrel during morning hours in New York, while Brent dropped 81 cents, or 1.62%, to $49.34.
Chances that the upcoming meeting among major oil producers in late September would yield any action to reduce the global glut appeared minimal after Iran said it would only cooperate in talks to freeze output if fellow exporters recognized its right to fully regain market share.