While you were sleeping: Clouds roll in on Fed

Wednesday 7th September 2016

Wall Street opened higher, then fell, before recovering as energy stocks caught up to Monday’s gain in oil, while a report showing US services industries grew at the weakest pace six years added to concern about the US economy.

A report by the Institute for Supply Management showed its non-manufacturing index fell to 51.4 in August, from 55.5 in July. This came on top of other recent reports—including Friday’s weaker-than-expected nonfarm payrolls data—that fuelled doubts the Federal Reserve will raise interest rates at this month’s policy meeting.

"In the last week alone, every major data point has missed estimates and that raises some major questions of what the Fed's next move is going to be," said Adam Sarhan, CEO at Sarhan Capital, told Reuters.

In 2.56pm trading in New York, the Dow Jones Industrial Average rose 0.2 percent, while the Nasdaq Composite Index added 0.4 percent. In 2.42pm trading, the Standard & Poor’s 500 Index increased 0.2 percent. On Monday US markets were closed for the Labour Day holiday.

US Treasuries rose, while the greenback slid.

The Dow moved higher as gains in shares of Chevron and those of Verizon, last up 1.6 percent and 1.5 percent respectively, outweighed slides in shares of General Electric and those of Home Depot, recently down 1.2 percent and 0.9 percent respectively.

Shares of Exxon Mobil also rose, up 1.4 percent in afternoon trading, as US energy stocks caught up to a gain in oil prices on Monday.

Monsanto shares fell, trading 1.1 percent weaker at US$106.22 as of 3.09pm in New York, after Germany’s Bayer made a third takeover bid for the US seed producer, increasing its offer for the second time.

Monsanto confirmed it has been in “constructive negotiations” with Bayer and that it received the latest offer.

“Monsanto is continuing these conversations as it evaluates this proposal, as well as proposals from other parties and other strategic alternatives,” the St Louis-based company said in a statement.

Bayer shares closed 1.4 percent higher in Frankfurt.

Monsanto expects to get at least US$130 per share, analysts at Commerzbank and Sanford C Bernstein said, Bloomberg reported.

They weren’t alone. "We still expect a bid per share in the US$130-135 range before Monsanto comes to the table. As such, we continue see the Bayer shares remaining under pressure as the negotiations continue," Baader Helvea analysts said in a note, Reuters reported.

In Europe, the Stoxx 600 Index ended the session with a decline of 0.3 percent from the previous close. France’s CAC 40 index slid 0.2 percent, while the UK’s FTSE 100 Index dropped 0.8 percent. Germany’s DAX index rose 0.1 percent.

“Investors had built some recovery hopes and now data are pointing in the other direction,” Ralf Zimmermann, a strategist at Bankhaus Lampe in Dusseldorf, Germany, told Bloomberg. “It adds to downside risks globally and we have had increasing fears about the global economy. Markets had gotten a bit ahead of fundamentals.”

BusinessDesk.co.nz

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