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GLOBAL MARKETS-Dollar up on Fed rate bets, earnings lift shares

Published 05/08/2015, 06:44 pm
Updated 05/08/2015, 06:46 pm
© Reuters.  GLOBAL MARKETS-Dollar up on Fed rate bets, earnings lift shares
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* September U.S. rates "liftoff" back on table

* Dollar index at highest since April

* Solid earnings boost European stocks

By Jamie McGeever

LONDON, Aug 5 (Reuters) - The dollar rose to its highest in more than three months and U.S. Treasury yields rebounded from two-month lows on Wednesday, after a Federal Reserve official said the central bank was close to raising interest rates.

The comments on Tuesday from Atlanta Federal Reserve President Dennis Lockhart, regarded as one of the Federal Open Market Committee's centrist policymakers, put next month back on the table for the first U.S. rate hike in almost a decade.

Solid European corporate earnings, notably from French bank Societe Generale SOGN.PA , boosted stocks after Lockhart's comments and a slide in Apple shares AAPL.O soured sentiment the previous day.

The dollar's strength kept gold prices anchored near recent five-year lows, though oil clawed back a small part of the 20 percent it has lost in the past month.

"The market has been wrong-footed once more by the Federal Reserve," said Kathleen Brooks, research director at FOREX.com.

"A rate hike cometh - time for the market to play catch up."

The dollar index, which measures it against a basket of currencies, rose to 98.218 .DXY , its highest since April 23. The greenback was close to multi-year highs against emerging market currencies including the South African rand, Brazilian real and Indonesian rupiah.

The euro fell 0.25 percent to a two-week low of $1.0847 EUR= .

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Investors narrowed the odds on a September U.S. rate hike, with Fed fund futures 0#FF: implying around a 1-in-2 chance, compared with around 1-in-3 after weak wage growth data last week.

Yields on 10-year Treasury notes US10YT=RR rose 3 basis points on the day to 2.24 percent, having hit two-month lows around 2.14 percent earlier this week.

In stocks, Europe's index of the leading 300 shares .FTEU3 was up 0.8 percent at 1,593 points, Britain's FTSE 100 .FTSE was up a third of one percent and Germany's DAX .GDAXI up 1 percent.

France's CAC 40 .FCHI was also up 1 percent, led by a 8.5 percent surge in SocGen shares after the bank reported second-quarter results that beat analysts' forecasts.

A report on Spain's service sector, which showed the fastest pace of growth in three months and strongest hiring in eight years, also boosted investor sentiment in Europe.

Earlier in Asia, Japan's Nikkei .N225 rose 0.5 percent but MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.2 percent.

In China, the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen was flat after curbs on short-selling prompted a sizable bounce on Tuesday.

There were also signs Chinese consumers could be taking over from manufacturers as the driving force for growth as the Caixin/Markit survey of services climbed to its highest in 11 months.

Losses on Wall Street on Tuesday had been modest with the Dow .DJI ending 0.27 percent lower, while the S&P 500 .SPX eased 0.22 percent and the Nasdaq .IXIC 0.19 percent.

Apple AAPL.O hit its lowest in over six months, apparently in part on worries about demand in China.

U.S. futures pointed to a higher open on Wall Street on Wednesday SPc1 .

"Rate hikes eventually burst bubbles, but it usually takes at least three. We think it is still too early to fight this bull market," Citi's U.S. equity strategy team said in a note to clients.

In commodity markets, Brent oil LCOc1 rose 1 percent to $50.46 a barrel and U.S. crude CLc1 gained 0.8 percent to $46.12, while gold eased to $1,085 an ounce XAU= . (Editing by John Stonestreet; To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)

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