While you were sleeping: Evans calls for patience on rates

Tuesday 14th October 2014

Wall Street inched higher, while the greenback weakened, as another US Federal Reserve official stressed the importance of patience with the central bank before it starts raising interest rates.

“I believe that the biggest risk we face today is prematurely engineering restrictive monetary conditions,” Chicago Fed President Charles Evans said in a speech in Indianapolis, Indiana. “I am very uncomfortable with calls to raise our policy rate sooner than later. I favour delaying liftoff until I am more certain that we have sufficient momentum in place toward our policy goals.

“And I think we should plan for our path of policy rate increases to be shallow in order to be sure that the economy’s momentum is sustainable in the presence of less accommodative financial conditions,” Evans said. “I look forward to the day when we can return to business-as-usual monetary policy, but that time has not yet arrived.”

The US dollar fell 0.3 percent against the euro, and shed 0.2 percent against the yen. US bond markets were closed for the Columbus Day holiday on Monday.

In late afternoon trading in New York, the Standard & Poor’s 500 Index rose 0.13 percent, while the Nasdaq Composite Index was up 0.43 percent.

The Dow Jones Industrial Average eked out a gain of 0.03 percent. Advances in shares of Microsoft and those of Visa, up 1.1 percent and 1 percent respectively, offset declines in shares of Merck and those of Walt Disney, down 2 percent and 1.2 percent respectively.

“Investors are in wait-and-see mode, waiting to figure which way the market is going to head,” Stephen Carl, principal and head equity trader at New York-based Williams Capital Group, told Bloomberg News. “The technical guys are focusing on the moving averages.”

A slew of US corporate earnings scheduled for release in the coming days may offer guidance.

"I think investors are looking at this earnings period with a bit of optimistic caution," Bruce Zaro, chief technical strategist, Bolton Global Asset Management in Boston, told Reuters. “Wall Street analysts continue to be a bit conservative on their estimates, and when all is said and done, you're going to have to beat rates both on earnings and revenue.”

Oil prices continued their slide and might fall further as top Middle East producers reportedly have said they are prepared for prices to fall further before cutting output.

"Judging by the latest comments from Kuwait and Saudi Arabia, we expect more near-term downside ahead for oil prices amidst the ongoing global growth scare,” Gordon Kwan, head of oil and gas research at Nomura, told Reuters. "Without a firm commitment to cut OPEC exports, China's increased demand alone is not enough to sustain a potential oil price rebound.”

Meanwhile, shares of CSX jumped, last up 8.4 percent, after the Wall Street Journal reported that Canadian Pacific Railway approached CSX about a combination that would unite two of North America’s largest railroad operators, citing people briefed on the matter. CSX rebuffed the overture, made in the past week, the people said, and it isn’t clear whether CP will persist.

In Europe, the Stoxx 600 ended the session marginally lower at 321.56. The index has dropped 7.8 percent from a nearly six-year high on September 4, according to Bloomberg.

France’s CAC 40 added 0.1 percent, Germany’s DAX increased 0.3 percent, while the UK’s FTSE 100 Index rose 0.4 percent.

BusinessDesk.co.nz

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