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- Asian shares skidded to 3-1/2-year lows and the dollar sagged on Tuesday, pulled down by sharp losses on Wall Street after weak Chinese data rekindled worries about its fragile economy. Commodities struggled after fears of weaker demand pushed them to multi-year lows overnight. Adding to the gloom, commodity trader Glencore’s Hong Kong-listed shares were around 28-percent lower on Tuesday, after its London-listed stock plunged on debt worries a day earlier. Chinese industrial companies’ profits fell at their fastest rate in four years, official data showed on Monday, sparking fresh fears about the strength of that country’s economy ahead the final reading of China’s Caixin Purchasing Managers’ Index on Thursday. The Fed held off from raising interest rates at its meeting earlier this month, citing worries about the global economy, particularly China. But New York Fed President William Dudley said the central bank remains on track for a likely rate hike this year and could move as soon as next month. John Williams, head of the San Francisco Fed, also signaled support for an interest rate hike this year, though Chicago Fed chief Charles Evans sounded a far more dovish tone. U.S. non-farm payrolls on Friday could add more clarity to the timing of a U.S. policy move, and prop up the sagging greenback. For now, lower U.S. Treasury yields continued to pressure the dollar, as investors sought the safety of fixed-income assets.
- A flurry of planned appearances this week by Federal Reserve officials began on Monday, but conflicting views by policymakers raised more questions about the U.S. central bank’s ability to manage its message at a critical juncture. William Dudley, head of the New York Fed, and John Williams, head of the San Francisco Fed, both signaled support for an interest rate hike this year, saying they expect inflation to rise towards the Fed’s 2-percent target. Williams sounded more hawkish, saying that just “a little bit” more data could convince him that a rate hike is needed. But Charles Evans, head of the Chicago Fed, took a far more dovish view, calling for rates to stay near zero until mid-2016. The Fed’s 17 policymakers have scheduled 16 separate speeches or public appearances this week across the country, less than two weeks after the central bank decided to delay what would be its first rate hike in nearly a decade. With financial markets increasingly predicting rates will not rise until next year, Fed Chair Janet Yellen attempted to set the record straight last week when she said the central bank was still on track to move before year end.
- Crude oil prices rebounded in Asia on Tuesday after a sharp sell off overnight on concern of a Fed rate hike. Ahead, the American Petroleum Institute will releases estimates of U.S. crude stockpiles last week to be followed by more closely watched data from the U.S. Department of Energy on Wednesday. Earlier, San Francisco Federal Reserve Bank President John Williams said Monday in the U.S. he sees monetary policy in the U.S. beginning to normalize this year. Fed officials continue to send signals that an interest rate hike could be forthcoming weeks after the U.S. central bank voted to hold its benchmark Federal Funds Rate at its current near-zero level for the 55th consecutive meeting. Speaking exclusively to the Wall Street Journal on Monday, New York Fed president William Dudley said the Fed is on track to hike rates before the end of the year and could reach its targeted goal for inflation at some point in 2016. In its inflation forecasts earlier this month, the Fed estimated that inflation would reach 1.7% by the end of next year and not hit 2.0% until 2018. It came days after Fed chair Janet Yellen offered her first personal endorsement of a 2015 rate hike since July during hawkish remarks in an appearance at the University of Massachusetts-Amherst last Thursday. While delivering a speech on inflation dynamics at the university’s Philip Gamble Memorial Lecture, Yellen noted that the inflation shortfall is likely to be transitory, as one-off factors such as lower energy prices and weaker imports due to a stronger dollar abate. Yellen added that inflation should reach the Fed’s 2% target when the labor market returns to full employment.