World stock markets turn red on Fed rate uncertainty

World stock markets turn red on Fed rate uncertainty
Global markets were falling on Monday over speculation about an imminent rate hike in the United States. This is the worst day for markets around the world since the Brexit referendum in June.

During afternoon trading in Europe, the British FTSE 100 index was down 2.60 percent, Germany’s DAX was losing 2.65 percent, while France’s CAC 40 slid three percent. The pan-European Stoxx 600 is starting the week with a 1.7 percent loss.

Russia’s dollar-traded RTS index fell 0.68 percent, while the ruble-denominated MICEX was down 0.46 percent.

Asian markets closed in the red on Monday, with China’s Shanghai Composite losing 1.85 percent, Japan’s Nikkei closing 1.73 percent down and Hong Kong’s Hang Seng plummeting 3.36 percent.

"(Boston Fed President Eric) Rosengren's comments last week really set this (sell-off) in motion, with his more hawkish comments... and that mood has continued now on Monday," SEB's chief emerging markets strategist Per Hammarlund told Reuters.

However, Hammarlund doesn’t expect the US authorities to raise the lending rate, "I think the data is a bit too weak and too unconvincing for them to already hike in September."

According to Hammarlund, markets were also affected by Beijing lifting yuan rates to seven-month highs.

"(The People's Bank of China) is trying to make offshore yuan funding more expensive, driving up forwards quite sharply and I suspect that will eventually squeeze out some long-dollar yuan forwards, but for now it is touching off a bit of a risk-off mood," he added.

Hawkish rhetoric from the US Fed also pushed American and German 10-year yields to their highest in two and a half months.

Oil was also depreciating Monday on reports US crude drillers added more rigs for the tenth consecutive week. US WTI and North Sea Brent crude were losing more than a dollar a barrel each, trading at $44.79 and $46.96.

Analysts see this as a sign that high-cost American oil producers have adapted to low prices and are increasing output.