Riskier Assets Drop Before Yellen Speech
Washington (Sept 24) Fed Chair Janet Yellen delivers a speech today in Amherst, Massachusetts, and any clues on when the U.S. central bank is likely to raise interest rates will be welcomed by investors around the world. Global stocks, as measured by the MSCI All Country World Index, fell for a fifth day, the longest losing streak for a month. The Japanese yen and gold are today's preferred haven trades.
The dollar's four-day winning run has petered out before the speech. The gains were driven by comments from four Fed officials who kept alive the prospects of a rate increase in 2015, despite last week's inaction. Their comments have fallen on deaf ears. The odds of a boost this year are 43 percent, down from 64 percent last Wednesday, according to Fed Fund futures. The Bloomberg Dollar Spot Index, which tracks the performance of 10 leading global currencies versus the greenback, rose to a six and a half week high on Wednesday. The gauge has risen 7.5 percent in 2015 and is on track for its third year of gains, a record run.
Japan played catch-up today. After a three-day holiday, investors got a chance to react to the weakest Chinese manufacturing data in six years and the Volkswagen emissions scandal. The Nikkei 225 Index dropped 2.8 percent, the biggest fall since Sept. 1. Automakers declined, with Mazda slumping 6.8 percent, Honda falling 3 percent and Nissan Motor slipping 2.5 percent at the close. Japanese carmakers have been investing in diesel technology to compete with their European rivals. The Nikkei has dropped 16 percent since hitting an almost 20-year high in June.
The last thing platinum needed was the Volkswagen scandal. Battered by China's economic and market woes, the precious metal sank to a six-year low on Wednesday. Prices rebounded as much as 2.8 percent today. Now platinum faces the possibility of a diesel engine boycott. That matters because 44 percent of its demand comes from devices that curb harmful gases from cars, particularly diesel types. Platinum has plunged 21 percent year and is 58 percent below its 2008 record.