US rate guesswork weighs

Stock markets across the world dipped Monday as investors tried to second-guess the US Federal Reserve on the timing of its next interest rate hike.

Tokyo, however, was the exception with stocks there soaring on a weaker yen.

In a much-scrutinized speech, Fed chief Janet Yellen on Friday hinted at a US interest rate rise by the end of the year.

Yellen said a pick-up in the world's top economy and an improvement in the jobs market meant "the case for an increase in the federal funds rate has strengthened in recent months".

She gave no timeframe during her speech at the annual Jackson Hole symposium of global central bankers, but Fed vice chairman Stanley Fischer later said September was a possibility.

- 'Difficult to interpret' -

"Markets are finding it difficult to interpret remarks by Janet Yellen and other Fed members on the future of interest rates," economists at Saxo Banque in Paris said in a note.

But Stephen Innes, senior trader at OANDA, said that "after a week of guessing, Yellen left little to the imagination when she stated that the case for a Fed rate hike had strengthened".

He added, however, that any decision would remain "very much data-dependent".

This means that all eyes will be on Friday's US jobs figures which, if strong, will clinch the case for an early rate hike, analysts said.

"Given the proximity of the granddaddy of all Fed data, the non-farm payroll, it is without question that this week's print will take on more importance than usual," Innes said.

Richard Jerram, chief economist at Bank of Singapore, said the upcoming jobs report may disappoint those hoping for a clear-cut early rate cut scenario.

"A soft number would be no surprise after two unusually strong months, which would put paid to the chance of a move in September. We think that a move in December is more likely, followed by two or three hikes next year."

In the meantime, the prospect of lingering uncertainty pushed down stocks in the eurozone, where both Frankfurt and Paris took their lead from weakness across Asian markets.

London, Europe's biggest stock market, was closed for a public holiday.

Expectations for a rate rise sent the dollar soaring in New York, and it extended its gains on Monday against both the yen and the euro.

- Boost for exporters -

Higher-yielding, or riskier, currencies were also hit, with South Korea's won losing one percent and the Indonesian rupiah off 0.5 percent, while Malaysia's ringgit shed 0.7 percent.

The weaker yen boosted Japan's exporters, sending the Nikkei stock index 2.3 percent higher at the close.

But while the greenback and Japanese traders took heart from Yellen's comments, other regional markets turned negative on the prospect of a rise in borrowing costs.

Shares in Hong Kong, where monetary policy is linked to that of the United States, fell 0.4 percent, while Sydney closed 0.8 percent lower and Seoul eased 0.3 percent. Singapore was 0.8 percent lower in late trade, while Shanghai finished marginally lower.

The stronger dollar also weighed on oil prices as it makes the commodity more expensive for those using weaker currencies.

West Texas Intermediate fell 1.3 percent to $47.04 and Brent shed 1.2 percent to $49.30.

Analysts said prices were also depressed by worries over the outcome of a meeting next month between OPEC and Russia aimed at addressing a global supply glut.

- Key figures at 0930 GMT -

Frankfurt - DAX 30: DOWN 0.7 percent at 10,518.05

Paris - CAC 40: DOWN 0.7 percent at 4,408.79

London - FTSE 100: Closed for public holiday

Tokyo - Nikkei 225: UP 2.3 percent at 16,737.49 (close)

Shanghai - Composite: DOWN 0.28 points at 3,070.03 (close)

Hong Kong - Hang Seng: DOWN 0.4 percent at 22,821.34 (close)

Euro/dollar: DOWN at $1.1190 from $1.1195 

Dollar/yen: UP at 102.20 yen from 101.77 yen Friday

Pound/dollar: DOWN at $1.3105 from $1.3135

New York - DOW: DOWN 0.3 percent at 18,395.40 (Friday's close)

Source: AFP