SN: US stocks open lower, in line with global declines
The keenly awaited minutes from the July 28-29 meeting of the Federal Open Market Committee showed just one panel member as ready to raise rates.
“The divide between those on the [Fed’s policy committee] who would like to raise rates in September and those who would prefer to wait is widening”, said Diane Swonk, chief economist at Mesirow Financial, in commenting on the Fed minutes.
“Members generally agreed that additional information on the outlook would be necessary before deciding to implement an increase in the target range”, the minutes said.
The central bank has kept a key rate that it controls at a record low near zero since December 2008. Besides, there’s no indication the Fed is raring to crank rates up quickly.
ASIA’S DAY: Japan’s Nikkei 225 slipped 1.6 percent to 20,222.63 and South Korea’s Kospi fell 0.9 percent to 1,939.38.
Fed officials were concerned about “recent decreases in oil prices and the possibility of adverse spillovers from slower economic growth in China“, according to the minutes.
“We think the desire by the Fed to move off the zero bound is greater than their desire to adhere dogmatically to their 2% inflation threshold, as long as they perceive the conditions being in place to allow inflation to tick up from here”. But “several participants noted that a material slowdown in Chinese economic activity could pose risks to the U.S. economic outlook”.
But analysts at Citigroup see China’s competitive devaluation as nothing more than a sideshow.
CHINA FEAR: Overseas, China’s stock market roiled Asian and European stocks, on fears that the country’s currency, the yuan, will continue to erode. The headline CPI also received a boost in June from a rise in energy prices, which increased by 1.7% for the month.
Traders are also waiting to see the U.S. consumer price index for July, to be released later on Wednesday. Because when it’s devalued, the U.S. dollar gets stronger, making American exports more expensive.
Stocks extended losses by mid-morning Wednesday as a surprise increase in crude inventories in the U.S. caused oil prices to fall close to $42 a barrel.
OIL: Benchmark U.S. crude fell 27 cent to $42.35 per barrel in electronic trading on the New York Mercantile Exchange.
The minutes showed policymakers continued to express broad concerns about lagging inflation and the weak world economy even as the US job market improved further.
Major indexes had fallen more than 1 percent in late morning trading but the Nasdaq and Dow industrials briefly turned positive after the release of the Fed minutes. The plunge dented hopes of Chinese share markets stabilizing after Beijing effectively pulled out all the stops to stem the rout.
