BU S INE S STUESDAY, AUGUST 23, 2016

LONDON: World stocks edged lower and thedollar strengthened yesterday on expectationsthe Federal Reserve will give a signal this weekthat it is gearing up to raise US interest rates.

An upbeat assessment of the US economy’sstrength from Fed Vice Chairman Stanley Fischeron Sunday was seen raising the prospect of Fedchair Janet Yellen flagging up a rate rise at ameeting with the world’s central bankers onFriday. The dollar index, which tracks the green-back against a basket of six major currencies,rose 0.2 percent to 94.718 , pulling away from asix-week low hit last week after minutes of the

Fed’s last policy meeting showed rate-setterssplit on when to hike.

“Fischer didn’t necessarily state when the Fedhas decided to hike rates, but his remarksseemed to be alluding that a rate hike might beround the corner,” said Craig Erlam, a senior mar-ket analyst at OANDA. European stocks fell 0.11percent, having received a temporary boost inearly trading by Syngenta after its proposedtakeover by ChemChina was approved by USregulators. Eurozone stock markets rose yester-day looking ahead to a key meeting of centralbankers at the end of the week, but London

retreated on heavy falls for heavyweight miningshares. Around 1000 GMT, London’s benchmarkFTSE 100 was down 0.4 percent compared withthe close on Friday.

In the eurozone, Frankfurt’s DAX 30 rose 0.3percent and the Paris CAC 40 gained 0.2 percent.Investors were looking ahead to “a relatively qui-et week with (Fed chief ) Janet Yellen headliningon Friday with her speech” at the Jackson Holegathering of central bankers, said Craig Erlam,senior market analyst at Oanda trading group.

“The Jackson Hole event has previously beena platform for the Fed to provide more clarity to

World stocks fall as investors await Fed hike signalthe markets and warn about upcomingpolicy changes, something the market iscurrently in desperate need of.”

The dollar rose against the euro and yenyesterday after the Federal Reserve’s vicechairman said the US economy was pickingup. Stanley Fischer on Sunday said that theworld’s top economy was meeting all theFed’s targets and that growth wouldimprove, hinting that borrowing costscould rise this year.

“It has become clear in recent days thatFed officials are increasingly divided overthe timing of when to move on rates next,and their constant briefings to the marketaren’t helping in this regard, which proba-bly explains why US markets have strug-gled for direction in the past few weeks,”said Michael Hewson, chief market analystat CMC Markets UK.

Minutes of the Federal Reserve’s Julymeeting published last week showed thatpolicymakers wanted to keep their “optionsopen” for monetary policy as they assessthe global economic outlook.

The board was divided on the near-termdanger of inflation, with some seeing littlethreat but others worried that there couldbe a sudden upward push on prices as thejobs market tightens. In London yesterdaymeanwhile, the FTSE was weighed downby a drop in prices of dollar-denominatedindustrial and precious metals. “It’s theFTSE’s commodity contingent that is hold-ing the index back... with a stronger dollarderived from hawkish Fed chat weighingon metals prices,” said Mike van Dulken,

head of research at Accendo Markets. Manyemerging countries borrow heavily in USdollars meaning an appreciation in thegreenback makes it more expensive forthem to service their debt. Interest ratefutures contracts indicate that the market ispricing in about 50/50 odds of a US rateincrease by the end of the year.

Asian shares slipped yesterday, whilethe dollar lifted off last week’s lows onexpectations a signal might emerge from aFederal Reserve gathering this week inJackson Hole, Wyoming, that the US centralbank is gearing up to hike interest rates.Global central bankers will join the annualmountain retreat that opens on Thursday,with Fed Chair Janet Yellen due to speak onFriday. The weaker yen proved a boon forJapan’s Nikkei which closed up 0.3 percent.It skidded 2.2 percent last week, as the dol-lar dipped below 100 yen.

China’s CSI 300 index retreated 0.6 per-cent and the Shanghai Composite lost 0.5percent as investors took profits. HongKong’s Hang Seng slipped 0.4 percent. OnSunday, Fed Vice Chairman Stanley Fischergave a generally upbeat assessment of theUS economy’s current strength, saying thejob market was close to full strength andstill improving. “Fischer’s comments haveraised some expectations in the market,particularly after (New York Fed PresidentWilliam)Dudley’s recent comments,” saidAyako Sera, market strategist atSumitomo Mitsui Trust Bank. Last week,Dudley said a rate hike would be possiblein September. —Agencies