While you were sleeping: UPDATED US stocks bounce back as rate fears ease


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Wall Street bounced back from Friday's rout, which ended two months of summer calm.

The rebound came after comments by US Federal Reserve Governor Lael Brainard bolstered bets the central bank won't raise interest rates next week.

"In today's new normal, the costs to the economy of greater than expected strength in demand are likely to be lower than the costs of significant unexpected weakness," Ms Brainard said.

"This asymmetry in risk management in today's new normal counsels prudence in the removal of policy."

The Federal Open Market Committee, of which Ms Brainard is a permanent voting member, begins its next two-day meeting on September 20.

Traders reduced their expectations for a September rate hike to 15% from 24% on Friday and for a December hike to 54.5% from 59.2%, Reuters reported, citing the CME Group's FedWatch tool.

Wall Street breathed a sigh of relief. At the close, the Dow Jones Industrial Average rallied 239.62 points, or 1.3%, to 18,325.04, while the Nasdaq Composite Index climbed 1.7% to 5211.89. In 2.53pm trading, the Standard & Poor's 500 Index advanced 1.5% to 2159.04, its biggest gain since July 8.

Gains in shares of Wal-Mart and Procter & Gamble, up 2.3% and 2.3% respectively, led the Dow higher.

Treasury yields rise
US Treasurys briefly rose on Ms Brainard's comments, then fell, pushing yields on the benchmark 10-year note one basis point higher to 1.671%.

"She didn't change the tone of what she had been saying much, and I think the snap rally was only because the market may have been preparing for a hawkish surprise," New York-based BMO Capital Markets Corp a fixed-income strategist Aaron Kohli told Bloomberg. BMO is one of the Fed's 23 primary dealers.

In Europe, the Stoxx 600 Index ended the session with a drop of 1% from the previous close. The UK's FTSE 100 Index declined 1.1%, France's CAC 40 index fell 1.2%, while Germany's DAX index slid 1.3%.

In the latest round of merger and acquisition activity, Canada's Potash Corp of Saskatchewan and Agrium agreed to merge to create the world's largest crop nutrient company.

Following the close of the transaction, expected during mid-2017, Potash Corp shareholders will own about 52% of the new company, and Agrium shareholders will own the remainder.

Agrium shares traded 2.6% lower at 2.12pm in Toronto, while Potash Corp shares traded 1 % weaker at 2.06pm in Toronto.

"This deal has some real antitrust concerns," Seth Bloom, a US Justice Department veteran who is now at Bloom Strategic Consulting, told Reuters.

(BusinessDesk)

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