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GLOBAL MARKETS-Stocks off highs, dollar dips as Fed rate rise looms
March 3, 2017 / 4:32 PM / 9 months ago

GLOBAL MARKETS-Stocks off highs, dollar dips as Fed rate rise looms

(Updates after U.S. market open, changes byline, previous dateline LONDON)

* World stocks drop; Yellen, Fischer speeches eyed

* French poll dimming Le Pen chances helps stocks and euro

* U.S. yields flat, dollar in rate hike commentary wait

By Sinead Carew

NEW YORK, March 3 (Reuters) - World equity markets edged off record highs and the U.S. dollar retreated on Friday after two days of gains as cautious investors held back amid mounting expectations for a U.S. interest rate hike in March.

U.S. Treasury yields were flat after a week of hawkish comments from several Federal Reserve officials and ahead of two Fed officials’ appearances on Friday that may provide clues on the direction of monetary policy. The implied probability of a March rate hike has surged to 74 percent, from just 30 percent at the start of the week.

U.S. stocks were down amid investor caution ahead of speeches by Fed Chair Janet Yellen and Vice Chair Stanley Fischer on Friday.

With indexes bolstered this week by increased bets on a rate hike soon, any divergence from Yellen would raise questions, said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

“There’s a certain caution in advance of her speaking. I would not be surprised with the market reacting with more vigor subsequent to her speaking,” said Luschini.

At 10:53 a.m. ET, the Dow Jones Industrial Average was down 20.58 points, or 0.1 percent, at 20,982.39, the S&P 500 lost 3.26 points, or 0.14 percent, to 2,378.66 and the Nasdaq Composite dipped 7.67 points, or 0.13 percent, to 5,853.55.

Europe’s benchmark STOXX 600 fell 0.1 percent but was also on track to end the week higher.

The MSCI global stock index was down 0.2 percent.

Benchmark U.S. 10-year Treasury yields were flat in early North American trading after hitting a two week high earlier on Friday, ahead of the Fed officials’ appearances.

Benchmark 10-year US10YT=RR notes were little changed in price to yield 2.489 percent. Yields touched 2.507 percent during European trading, the highest since Feb. 15.

The dollar index, which measures the greenback’s strength against a basket of six major currencies, eased about 0.3 percent but was poised for its fourth straight weekly gain.

“The markets are looking for validation for the increase in Fed rate hike expectations from comments from Fed Chair Yellen. That’s the key issue for the market right now,” said Shaun Osborne, chief FX strategist, at Scotiabank in Toronto.

The euro rose 0.4 percent to $1.0566 and France’s bluechip CAC 40 index rose 0.6 percent, as far-right candidate Marine Le Pen’s chances in the country’s presidential election dimmed.

“We saw a peak of panic in February when the focus was on Le Pen,” said DZ Bank strategist Christian Lenk. “It’s always been clear that the odds of Le Pen becoming the next president were quite low and now we see confirmation of that in the polls.”

Oil prices rose as the dollar fell, though gains were held in check by unchanged Russian output for February, a sign of its weak compliance on a global deal to cut supplies.

Benchmark Brent crude futures were up 0.7 percent at $55.46 a barrel after closing down 2.3 percent in the previous session. WTI futures gained 16 cents, or 0.7 percent, to $53. (Additional reporting by Saqib Iqbal Ahmed and Dion Rabouin in New York, Vikram Subhedar in London, Dhara Ranasighe and Wayne Cole in SYDNEY; Editing by Bernadette Baum)

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