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- Asian stocks sagged on Monday after Wall Street’s uninspiring Friday performance and ahead of key economic indicators, while the dollar consolidated its gains against the yen and euro. Fed Chair Janet Yellen on Thursday revived prospects of an interest rate hike before year-end, easing concerns about slowing global growth that helped the dollar and risk assets, which have been buffeted by fears over China’s sputtering economy. Strong second quarter U.S. GDP data released on Friday further sharpened the case for the Fed to raise rates in 2015. Focus now turns to this Friday’s U.S. non-farm payrolls as the markets try to gauge whether labor market conditions are strong enough for the Fed to tighten monetary policy
- The world’s major currencies got off to a slow start on Monday following a relatively uneventful weekend with the dollar showing potential for gains if upcoming data strengthen the case for a hike in interest rates this year. Earlier in the month the Federal Reserve delayed a long-anticipated rise in U.S. rates, sparking volatility in global markets. Since then a string of Fed officials, including Janet Yellen herself last Thursday, has assured markets that the bank is still on track to normalize policy this year. Kansas City Fed President Esther George on Friday said she believes the Fed should act soon so that it will “have the luxury” of being able keep rate hikes gradual.
- Oil prices dropped in Asian trading hours on Monday despite a fall in U.S. drilling activity for the fourth straight week, with analysts pointing to a poor economic growth outlook as the main reason for low crude prices. China’s August industrial profits dropped 8.8 percent from the same month last year, and January to August industry profits were down 1.9 percent. Monday’s price falls came despite an ongoing reduction in U.S. drilling activity. U.S. energy companies cut oil rigs for a fourth week in a row last week, a sign continued weak prices were causing oil and gas producers to reduce drilling plans. Yet analysts said U.S. oil output was holding up despite the lower drilling. Analysts said U.S. output data would likely be the main driver this week of oil prices, especially as Chinese trading slows ahead of its seven-day National Day holiday that starts on Oct. 1. The U.S. EIA is due to release its monthly petroleum supply report on Wednesday.
- The International Monetary Fund (IMF) is likely to revise downwards its estimates for global economic growth due to slower growth in emerging economies, IMF head Christine Lagarde said in a newspaper interview. A forecast of 3.3 percent growth this year is no longer realistic. A forecast of 3.8 percent for next year neither. We will however remain above the 3 percent threshold,” she said. The IMF is due to release updated economic forecasts in October.