Fed vice chair talks days before Yellen’s Jackson Hole address Oil ends longest gain in 4 years on Nigeria, Iraq supply view Share on Facebook Share on Twitter The dollar strengthened, while commodities fell as comments from a Federal Reserve official boosted speculation that U.S. interest rates will rise this year. Most major currencies dropped against the dollar after Fed Vice Chairman Stanley Fischer said the world’s largest economy is already close to meeting the central bank’s goals and that growth will pick up. The S&P 500 Index fluctuated as a rally in drugmakers offset a slide in energy companies. Treasuries rebounded after a decline in commodities drove investors into haven assets. Oil halted the longest run of gains in four years. Markets have been whipsawed by comments from regional Fed chiefs including William Dudley and John Williams that indicated U.S. borrowing costs may rise as early as next month. While Fischer gave no specific mention on the timing of a rate increase, traders keep looking for clues from central bankers. Chair Janet Yellen speaks Friday at an annual symposium hosted by the Kansas City Fed in Jackson Hole, Wyoming. “Stan Fischer’s comments clearly raised the risk of a more hawkish tone from Yellen on Friday; so that’s impacting the dollar, risk assets and commodity prices,� said Dennis Debusschere, a senior managing director and global portfolio strategist at Evercore ISI in New York. “Any weakness related to the prospects of Fed tightening is going to be short lived.� Currencies The Bloomberg Dollar Spot Index rose 0.2 percent as of 10:30 a.m. in New York, after losing ground in each of the last two weeks, as speculation of higher borrowing costs boosts the currency’s appeal. Futures traders assigned a 26 percent probability to a September rate increase by the Fed, up from 18 percent a week earlier. Any potential rate increase would buck the trend of monetary easing by central banks in developed markets. Bank of Japan Governor Haruhiko Kuroda told the Sankei newspaper that there is “sufficient chance� the BOJ will add to its unprecedented easing at next month’s policy meeting and that “technically� there is room for deeper negative rates. The European Central Bank meanwhile is also weighing whether to increase its stimulus package in the wake of the U.K.’s vote to leave the European Union. The U.S. currency strengthened 0.2 percent to 100.39 yen, and 0.1 percent to $1.1313 per euro. It fell against the British pound. Most emerging-market currencies declined, led by Russia’s ruble. Turkey’s lira slumped after Fitch Ratings cut the outlook on the nation’s debt as a failed coup attempt last month increased the political risks in the country. Stocks The S&P 500 Index was little changed. Marathon Oil Corp. tumbled after announcing the departure of its chief financial officer. Medivation Inc. jumped 20 percent, boosting biotechnology shares after Pfizer Inc. agreed to buy the company for about $14 billion. Intersil Corp.also surged after a person familiar with matter said the chipmaker is in talks to be acquired by Japan’s Renesas Electronics Corp. for about $3 billion. A rally that has brought equities to a series of all-time highs since early July lost some momentum last week as investors mulled extended valuations, skepticism over a recovery in corporate profits and mixed signals from policy makers over the timing for higher rates. The S&P 500 closed Friday down less than a point over the five-day period for just its second weekly decline since June. The gauge’s price relative to future earnings has climbed to 18.6, the highest since 2002. The slide in commodity producers also weighed on European equities, which were little changed. Heavyweight Syngenta AG jumped 11 percent as China National Chemical Corp. received approval from U.S. national security officials for its $43 billion takeover of the Swiss chemical company. The MSCI Emerging Markets Index fell 0.6 percent. Shares in Shanghai retreated the most in three weeks and Saudi Arabia led declines in Gulf stocks. Bonds The U.S. 10-year note yield fell three basis points or 0.03 percentage point, to 1.55 percent, according to Bloomberg Bond Trader data. Two-year note yields fell one basis point to 0.74 percent after earlier reaching the highest since June 23 -- the day Britain voted to leave the European Union, and before the result of that referendum sparked a buying spree in the safest government debt. “The 1.6 percent yield level on 10-year notes brought in significant Asian buying,� said Tom di Galoma, managing director of government trading and strategy at investment bank Seaport Global Holdings LLC in New York. “The drop in crude this morning added to bullishness in Treasuries.� Benchmark 10-year bunds advanced on Monday with their euro-area counterparts, after sliding last week. Commodities Oil slumped as Iraq sought to increase exports amid a global oversupply and Nigerian militants called an end to hostilities. West Texas Intermediate for September delivery, which expires Monday, slid 2.7 percent to $47.21 a barrel on the New York Mercantile Exchange. Crude had entered a bull market on Thursday, having climbed more than 20 percent since dipping below $40 a barrel earlier in the month. Speculation that informal OPEC talks next month may lead to action to stabilize the market had pushed prices higher, yet some oil-producing nations may be reluctant to cap output as crude’s two-year slump continues to erode revenue. “Because of the fiscal position many oil producers find themselves in, they all desperately want to produce more volume,� Stephen King, senior economic adviser to HSBC Holdings Plc in London, said in a Bloomberg Television interview. “A freeze in itself would be very good news for the oil market. The difficulty is trying to enforce a freeze in any particularly credible way.� Gold fell for a second day and silver tumbled to the lowest in more than seven weeks. Precious metals have rallied this year as the Fed refrained from tightening and other central banks embraced low or negative rates, benefiting bullion, which doesn’t pay interest.

Source