NEW YORK CITY: US stocks rallied on Monday (Tuesday in Manila) as a top Federal Reserve official argued against hiking interest rates quickly.
Dovish remarks from Fed Governor Lael Brainard helped US stocks climb about 1.5 percent, recovering nearly all of the losses from Friday, when surprisingly hawkish comments from other Fed officials sparked a sell-off.
European and Asian markets, still trading on the basis of Friday’s Fed commentary in the US, retreated.
Frankfurt, Paris and London all shed more than one percent, while Japan’s Nikkei lost 1.7 percent and Hong Kong 3.4 percent.
“While this doesn’t necessarily mean that rates will go up in September, it still causes uncertainty which historically stocks rather dislike,” said Markus Huber, a trader for City of London Markets.
On Monday, Brainard said the US central bank should adopt a “moderate and gradual” approach to lifting rates and avoid moves to “tighten policy preemptively.”
Her remarks stood in contrast to comments Friday from a pair of Fed officials, Boston Fed President Eric Rosengren and Governor Daniel Tarullo, who signaled that a rate hike could come as soon as this month.
Brainard “didn’t sound nearly as hawkish as the other folks,” said Art Hogan, chief market strategist at Wunderlich Securities.
“That makes us think that our vision of monetary policy really hasn’t changed, and the market is trying to recalibrate that a little bit.”
In Frankfurt, Linde shares fell seven percent after the German gas giant and US peer Praxair ended merger talks, leaving intact the number one spot in industrial gases for France’s Air Liquide, which fell one percent in Paris.
Praxair rose 1.0 percent.
Shares of Potash Corp. dropped 1.2 percent, while rival Agrium lost 2.7 percent after the companies announced a merger to create the largest crop nutrient company in the world. The move comes amid a wave of agribusiness mergers sparked by low crop prices.
HP Inc. rose 3.9 percent following its move to buy Samsung Electronics’ printer business for $1.05 billion.
Tesla Motors rose 2.0 percent after announcing that it upgraded its Autopilot software to use more advanced radar technology.