IMF Urges Fed to Delay Rate Hike, Volatile Bond Markets

Nichole Harper
04 Jun, 2015
New York City

Market indexes on Wall Street dived on weak productivity report. International Monetary Fund urged the Federal Reserve to delay rate hike and lowered its annual growth outlook to 2.5%. Volatility persisted in global bond markets.

[R]1:20 PM – Market indexes on Wall Street dived on weak productivity report. International Monetary Fund urged the Federal Reserve to delay rate hike and lowered its annual growth outlook to 2.5%. Volatility persisted in global bond markets.[/R]

Market indexes on Wall Street opened lower and in choppy trading aborted an attempt to recover losses.

By mid-day index dropped to a low in the session and struggled near the bottom after the latest read on productivity showed a decline and bond market yield lacked direction in volatile trading.

The International Monetary Fund urged the Federal Reserve to delay rate hike until next year.

After completed the annual review of the U.S. economy, the I.M.F. said growth drivers have been “disappointing” and lowered its 2015 growth estimate to 2.5% from the previous estimate of 3.1%.

The Fed is scheduled to release its economic assessment at the end of next policy meeting on June 17.

Christine Lagarde, the managing director of the fund, said at a news conference today that the recent strength in the dollar, driven by the relative weakness in the developed economies of the rest of the world, is limiting the growth in the U.S. economy.

Jobless Claims Falls

Seasonally adjusted weekly jobless claims declined 8,000 to 276,000 from the revised claims of 284,000 in the previous week, the Department of Labor reported.

In a separate report the department said revised nonfarm business sector labor productivity fell at 3.1% annual rate during the first-quarter and slid 2.1% in last quarter.

On Wall Street, Tollbooth Strategy Index slid 0.3% or 33.08 to 10,781.28.

S&P 500 index fell 0.5% or 11.70 to 2,102.43 and the Nasdaq Composite Index slipped 0.5% or 23.98 to 5,075.31.

Crude oil in New York dropped $1.76 to $62.04 a barrel and gold plunged $10.20 to $1,174.70 an ounce.

U.S. Movers

Boeing Company ((BA)) slipped 1.4% or $2.07 to $141.73 after the aerospace company signed an agreement with the China-based Shenzen Airlines to deliver 46 commercial aircraft of 737 series valued at a list price of $4.3 billion between fiscal 2016 and 2020.

As of May 28, the company received total orders of 134 aircrafts in the year before this announcement.

Costco Wholesale Corporation ((COST)) slid 33 cents to $141.82 after the discount stores operator reported net sales in four-weeks period ending in May jumped 2% to $8.98 billion from $8.78 billion from a year ago month.

Comparable store sales in the month were flat, U.S. sales increased 2% while international comparable sales declined 4%.

Cato Corporation ((CATO)) gained 1.6% or 59 cents to $37.90 after the women''s fashion specialty retailer said sales in four-weeks period ending in May rose 2% to $88.5 million and same-store sales in the month were flat from a year ago period.

J M Smucker Co ((SJM)) dropped 2.3% or $2.67 to $115.52 after the food products maker said net sales in the fourth-quarter ending in April soared 17% to $1.45 billion from a year ago period.

Net in the quarter swung to a loss of $90.3 million or 82 cents per diluted share compared to profit of $118.5 million or $1.16 from the same quarter last year.

Smucker forecasted net sales for the year to climb 40% to $8 billion and earnings per share between $5.65 and $5.80.

European Markets

Market indexes struggled across Europe and bond market volatility persisted after the benchmark German 10-year bund yield dropped to a new 2015 high.

The euro closed at a five-month high to $1.132 after the U.S. dollar eased in the late afternoon trading.

In London trading, FTSE 100 index slipped 0.9% or 62.68 to 6,887.51 and in Frankfurt the DAX index fell 0.2% or 31.51 to 11,389.77.

In Paris, CAC 40 index decreased 0.4% or 22 to 5,012.17.

The benchmark index in Athens declined 2.7% after jumping 4% on Wednesday as Greece and international lenders send conflicting signals on the prospect of an accord.

Greek Prime Minister Alexis Tsipras said after he completed talks with the senior EU officials in Brussels that the nation is on track to make the next scheduled payment to the International Monetary Fund on Friday.

Nomad Holdings Limited, the U.K.-based said it is in talk to acquire Iglo Foods Holdings Limited, a leading European frozen and seafood provider, from Permira funds for approximately €2.6 billion.

Telecom Italia SpA increased 1.5% to €1.19 after the Italy-based mobile communications provider plans to raise up to €936 million from the listing of a minority stake in its broadcasting tower unit INWIT.

The company set price range between €3.25 and €3.90 per share valuing INWIT between €1.95 billion and €2.34 billion.

Asian Markets

Nikkei average in Tokyo rebounded after two days of losses and traders were cautious. Online retailer Rakuten announced a stock offering of $1.6 billion to repay debt.

In addition, Softbank said it plans to invest $1 billion in South Korea based online retailer Coupang.

Nikkei average in Tokyo rebounded after two days of losses but traders were cautious on volatile bond markets in Europe and in New York.

The Nikkei 225 Stock Average rose 14.68 to 20,488.19 and the broader Topix index edged up 3.90 to 1,673.89.

The yen closed at 124.33 against a dollar.

Softbank Corporation slipped 1.2% to 7,348 yen after the telecoms group said it will invest $1 billion in South Korea-based online retailer Coupang.

Rakuten Inc declined 6.2% to 1,951.50 yen after the online shopping mall operator reported the company planned to offer 99.61 million new shares worth 188 billion yen or $1.5 billion and use 90% of proceeds to reduce the debt of about 80 billion yen and rest to fund future acquisitions and investments.

Sensex in Mumbai extended losses and rupee drifted to a new low in the year.

Rupee weakened 9 paisa to 63.99 against one U.S. dollar and traded as low as 64.27.

The Sensex Index fell 23.78 to close at 26,813.42. The CNX Nifty slid 4.45 to 8,130.65.

Adani Ports and Special Economic Zone Limited climbed 4.5% to ₹311.25 after the Reserve Bank of India allowed foreign investors to invest up to 40% of the paid-up capital in the company.

Bharti Airtel Limited decreased 1.3% to ₹416 after the largest wireless service provider is planning a global bond offering of $1 billion or around ₹6,400 crore.