The Jim Bakker Show

Nasdaq hits record high after Fed leaves rates unchanged

Floor governor Giacchi gives a price for Noble Midstream Partners LP, during the company's IPO on the floor of the New York Stock

By Yashaswini Swamynathan

(Reuters) – The Nasdaq hit a record intraday high on Thursday amid broad gains in U.S. stocks, a day after the Federal Reserve stood pat on interest rates.

While the risks to economic outlook were roughly “balanced”, the Fed maintained rates as inflation continued to run below its 2 percent target and members saw room for improvement in the labor market.

The central bank slowed the pace of future hikes and cut its longer run interest rate forecast to 2.9 percent from 3 percent, but sent a strong signal for a move by the end of this year.

“The Fed probably appeared less hawkish than what the markets had expected,” said Ryan Larson, head of equity trading at RBC Global Asset Management in Chicago. “I think the market continues to be focused on the Fed pushing a hike for later as a good thing rather than bad.”

The consensus among economists is for a hike in December as the Fed’s November meeting comes right around the U.S. Presidential elections.

The probability of a November hike stands at a modest 12.4 percent, and rises to 58.4 percent for December, according to the CME Group’s FedWatch tool.

The dollar index dropped 0.6 percent on Thursday, and was on track to mark the second straight day of losses after the central bank’s decision.

Oil prices rose about 1.8 percent as the dollar fell and U.S. crude inventories recorded a surprise drop.

At 9:36 a.m. ET (1336 GMT), the Dow Jones Industrial Average was up 132.52 points, or 0.72 percent, at 18,426.22.

The S&P 500 was up 15.01 points, or 0.69 percent, at 2,178.13.

The Nasdaq Composite was up 32.98 points, or 0.62 percent, at 5,328.22, after rising as much as 0.65 percent to a record of 5329.92.

The S&P energy index surged 1.33 percent and was the top gainer among the 11 major sectors of the benchmark index.

Adding some support to the Fed’s plans for at least one hike this year was a report that showed the number of Americans applying for unemployment last week fell to a two-month low.

Shares of Apple rose 0.9 percent to $114.56 and was the top influence on the S&P and the Nasdaq after Nomura and RBC raised their price targets.

Red Hat rose 6.7 percent to $82.27 after the Linux operating system distributor reported second-quarter revenue and profit that beat market expectations.

One weak spot was Jabil Circuit, which dropped nearly 6 percent to $22.34 after the contract electronics maker said it intended to realign its business at a cost of $195 million over two years.

Advancing issues outnumbered decliners on the NYSE by 2,552 to 185. On the Nasdaq, 1,804 issues rose and 429 fell.

The S&P 500 index showed 26 new 52-week highs and no new lows, while the Nasdaq recorded 80 new highs and three new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Don Sebastian)

Oil jumps after surprise drop in U.S. crude inventories

The Philadelphia Energy Solutions oil refinery owned by The Carlyle Group is seen at sunset in front of the Philadelphia skyline

By Amanda Cooper

LONDON (Reuters) – Oil prices jumped 2 percent on Wednesday after a surprisingly large drop in U.S. crude inventories and as an oil services workers strike in Norway threatened to cut North Sea output.

Brent crude futures were up 91 cents at $46.79 per barrel by 1113 GMT, while West Texas Intermediate (WTI) crude futures rose by 96 cents to $45.01 a barrel.

Oil took its cue from American Petroleum Institute (API) data which showed a 7.5 million barrel drop in U.S. crude inventories to 507.2 million barrels, almost twice the fall expected by analysts.

“Oil’s got its own pretty positive drivers at the moment. The API surprise draw overnight is obviously leading to the question of whether we are going to see the same in the official inventory today,” CMC Markets strategist Jasper Lawler said.

Official storage data is due to be published by the U.S. Energy Information Administration (EIA) later on Wednesday.

Adding to the upward price momentum was an oil service workers strike in Norway that could affect output from western Europe’s biggest crude producing region.

Nevertheless, analysts said any gains could be tempered by caution ahead of the Federal Reserve’s Federal Open Market Committee (FOMC) decision on interest rates later on Wednesday.

Economists do not expect a change in rates but any indication from the Fed on the outlook for economic growth could have an impact on the dollar, and in turn, on oil.

“I don’t expect the Fed to do anything and I don’t expect a ‘hawkish hold’ either. But a bit of dollar weakness should support the backdrop for oil,” CMC’s Lawler said.

“Wednesday has become ‘Big Wednesday’ for oil traders, with not only the FOMC but also the EIA crude inventory numbers out. Should they (EIA) follow the unexpected drawdown like the API and we get no FOMC rate hike, oil bulls may well have reason to be cheering after a tough couple of weeks,” Singapore-based brokerage Oanda said.

Key for the market is next week’s meeting in Algeria between producers from the Organization of the Petroleum Exporting Countries (OPEC) and Russia to discuss measures to rein in oversupply, including an output freeze at current levels, but analysts said they did not expect significant results.

“Even with a freeze – which would still mean OPEC production is at record levels – we will still be in an oversupplied market,” said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai.

(Additional reporting by Henning Gloystein and Mark Tay in Singapore; editing by David Clarke)

U.S. housing starts tumble, flooding in the South blamed

Roofers work on new homes at a residential construction site in the west side of the Las Vegas Valley in Las Vegas, Nevada

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. housing starts fell more than expected in August likely as bad weather disrupted building activity in the South, but a solid increase in permits for single-family dwellings suggested demand for housing remained intact.

Tuesday’s weak housing report came as officials from the Federal Reserve were due to gather for a two-day meeting to assess the economy and deliberate on monetary policy.

It joined a stream of recent soft economic data such as retail sales, nonfarm payrolls and industrial production, which, together with low inflation are expected to encourage the U.S. central bank to leave interest rates unchanged on Wednesday.

Groundbreaking decreased 5.8 percent to a seasonally adjusted annual pace of 1.14 million units after two straight months of strong gains, the Commerce Department said.

Single-family housing starts in the South, which accounts for the bulk of home building, tumbled 13.1 percent to their lowest level since May 2015. Economists said flooding in Texas and Louisiana was probably behind the drop in starts last month.

“We believe that the slowdown in August starts likely owes to a temporary weather effect rather than a substantive shift in the underlying trend,” said Rob Martin, an economist at Barclays in New York. “Excluding the South, housing starts increased a robust 4.2 percent.”

Permits for future construction slipped 0.4 percent to a 1.14 million-unit rate last month as approvals for the volatile multi-family homes segment tumbled 7.2 percent to a 402,000 unit-rate. Permits for single-family homes, the largest segment of the market, surged 3.7 percent to a 737,000-unit pace.

Economists polled by Reuters had forecast housing starts falling to a 1.19 million-unit pace last month and building permits rising to a 1.17 million-unit rate.

U.S. financial markets were little moved by the data as investors awaited Wednesday’s outcome of the Fed’s meeting. The broader PHLX housing index, which includes builders, building products and mortgage companies, fell 0.76 percent.

STRONG HOUSING FUNDAMENTALS

Last month’s decline in starts was largely anticipated as groundbreaking activity has been running well ahead of permits approvals over the past several months, especially in the single-family housing segment.

The drop left starts just below their second-quarter average, suggesting little or no contribution from residential construction to economic growth in the third quarter.

Spending on home building was a small drag on output in the April-June period. Following the report, the Atlanta Fed trimmed its third-quarter gross domestic product estimate by one-tenth of a percentage point to a 2.9 percent annual rate. The economy grew at a 1.1 percent rate in the second quarter.

Demand for housing is being driven by a tightening labor market, which is lifting wages. A survey of homebuilders published on Monday showed confidence hitting an 11-month high in September, with builders bullish about current sales now and over the next six months, as well as prospective buyer traffic.

Housing market strength boosted Lennar Corp’s profits in the third quarter. Lennar, the second-largest U.S. homebuilder, said it sold 6,779 homes in the three months ended Aug. 31, up 7.3 percent from a year earlier, while its average sales price rose more than 3 percent.

“Conditions seem well aligned for strong new home building. Borrowing costs remain low, the inventory of homes for sale, both new and existing, are relatively low and failing to make meaningful progress,” said Kristin Reynolds, a U.S. economist at IHS Global Insight in Lexington, Massachusetts.

Groundbreaking on single-family homes dropped 6.0 percent to a 722,000-unit pace in August, the lowest level since last October. But with permits for the construction of single-family homes rising last month, single-family home building could rebound in the months ahead.

The single-family housing market is being supported by a dearth of previously owned homes available for sale.

Housing starts for the volatile multi-family segment fell 5.4 percent to a 420,000-unit pace. The multi-family segment of the market has been buoyed by strong demand for rental accommodation as some Americans shun homeownership in the aftermath of the housing market collapse.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Rising rents, healthcare costs boost consumer prices

A nurse prepares a bag of saline at Intermountain Healthcare's Utah Valley Regional Medical Center in Provo, Utah

y Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices increased more than expected in August as rising rents and healthcare costs offset a drop in gasoline prices, pointing to a steady build-up of inflation that could allow the Federal Reserve to raise interest rates this year.

The Labor Department said on Friday its Consumer Price Index rose 0.2 percent last month after being unchanged in July. In the 12 months through August, the CPI increased 1.1 percent after advancing 0.8 percent in July.

The so-called core CPI, which strips out food and energy costs, rose 0.3 percent last month, the biggest increase since February, after gaining 0.1 percent in July.

Economists had forecast the CPI nudging up 0.1 percent last month and the core CPI gaining 0.2 percent. The core CPI increased 2.3 percent in the 12 months through August after rising 2.2 percent in the year through July.

U.S. Treasury prices pared gains and U.S. stock futures extended losses after the data. The dollar was stronger against a basket of currencies.

Last month’s uptick in inflation is likely to be welcomed by Fed officials when they meet next Tuesday and Wednesday to deliberate on monetary policy.

But against the backdrop of a raft of disappointing economic reports for August, including weak retail sales and industrial production, as well as a slowdown in job growth, the U.S. central bank is expected to leave interest rates unchanged.

The Fed has a 2 percent inflation target and tracks an inflation measure which has been stuck at 1.6 percent since March. Fed Governor Lael Brainard said on Monday she wanted to see stronger consumer spending data and signs of rising inflation before hiking rates.

The U.S. central bank raised its benchmark overnight interest rate at the end of last year for the first time in nearly a decade, but has held it steady since amid concerns over persistently low inflation.

Financial markets have virtually priced out a rate increase next week and many economists expect the Fed to raise borrowing costs in December.

In August, gasoline prices fell 0.9 percent after sliding 4.7 percent in July. Food prices were unchanged, with the cost of food consumed at home declining for a fourth straight month.

Within the core CPI basket, housing and medical costs continued their upward march. Owners’ equivalent rent of primary residence rose 0.3 percent in August. It has risen by the same margin every month since April.

Medical care costs jumped 1.0 percent last month, the largest increase since February 1984, after advancing 0.5 percent in July. The cost of hospital services surged 1.7 percent, the biggest gain since October 2015. Prices for prescription medicine soared 1.3 percent.

Americans also paid more for motor vehicle insurance and apparel. Prices for tobacco also rose, but the cost of used cars and trucks fell for a sixth straight month.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Fed looks unlikely to hikes next week after Brainard warning

Federal Reserve Governor Lael Brainard delivers remarks on "Coming of Age in the Great Recession"

By Jason Lange and Karen Pierog

CHICAGO (Reuters) – The Federal Reserve should avoid removing support for the U.S. economy too quickly, Fed Governor Lael Brainard said on Monday in comments that solidified the view the central bank would leave interest rates unchanged next week.

Brainard said she wanted to see a stronger trend in U.S. consumer spending and evidence of rising inflation before the Fed raises rates, and that the United States still looked vulnerable to economic weakness abroad.

“Today’s new normal counsels prudence in the removal of policy accommodation,” Brainard, one of six permanent voters on the Fed’s rate-setting committee, told the Chicago Council on Global Affairs.

She said the U.S. labor market was not yet at full strength, which means “the case to tighten policy preemptively is less compelling.”

Brainard did not comment on the specific timing of future rate policy changes but she held firm in arguing for caution in what could be the last word from a Fed policymaker before the central bank’s Sept. 20-21 meeting.

Policymakers will go into the meeting divided, with some concerned current low rates will fuel a surge in inflation while another camp, which includes Brainard, has argued that the Fed should not rush to raise rates.

Many other policymakers think the U.S. job market is near full strength and Fed Chair Janet Yellen argued in July the case for rate increases has strengthened.

“I think circumstances call for a lively discussion next week,” said Atlanta Fed President Dennis Lockhart, who will not be a voter at next week’s policy review but will participate in discussions.

Brainard said on Monday the labor market might still tighten further without putting pressure on inflation.

“The response of inflation to unexpected strength in demand will likely be modest and gradual, requiring a correspondingly moderate policy response,” she said.

U.S. stock prices rose following Brainard’s comments while the dollar weakened and yields on U.S. government debt fell. Traders trimmed their odds for a September rate hike to 15 percent from 24 percent on Friday, according to CME Group. Investors still saw just higher than 50/50 odds for a December hike.

The central bank last raised borrowing costs in December, ending seven years of near-zero rates. Policymakers signaled in June they could still hike rates twice in what remained of 2016.

Over the last year, Brainard has been one of the Fed’s most vocal defenders of low interest rate policy, arguing the United States is vulnerable to economic troubles in Asia and Europe.

She said on Monday the low interest rate policies across advanced economies could make the United States more vulnerable to spikes in the value of the dollar which could put downward pressure on inflation.

Republican Presidential candidate Donald Trump accused the Fed on Monday of keeping interest rates low because of political pressure from the Obama administration.

Minneapolis Fed President Neel Kashkari said “politics does not play a part” in the Fed’s deliberations and that current low U.S. inflation means there is no “huge urgency” to hike.

Inflation has been below the Fed’s 2 percent inflation target for the last four years.

Viewed as an influential voice of caution within the Fed’s Washington-based board of governors, Brainard was the U.S. Treasury’s undersecretary for international affairs from 2010 to 2013.

(Reporting by Jason Lange in Chicago; Editing by Meredith Mazzilli)

Mastercard sued for $19 billion in Britain’s biggest damages claim

By Andrew MacAskill

LONDON (Reuters) – Some 46 million people in Britain could potentially benefit from a legal case brought against Mastercard <MA.N> demanding 14 billion pounds ($19 billion) in damages for allegedly charging excessive fees, according to court documents filed in London.

The case brought by a former chief financial services ombudsman alleges the payments company charged unlawfully high fees to stores when shoppers swiped their debit or credit cards and these were passed on to consumers in higher prices.

Mastercard is alleged to have done this for 16 years between 1992 and 2008, in more than 600 pages of documents filed at the Competition Appeal Tribunal on Thursday.”This was almost an invisible tax,” Walter Merricks, who is bringing the case, told the BBC. “Mastercard has behaved disgracefully in this. They have not had the reasonableness to accept that what this was doing was damaging UK consumers.”

Mastercard said in a statement it denied any wrongdoing.”We continue to firmly disagree with the basis of this claim and we intend to oppose it vigorously,” the world’s second-largest payments network said.

The lawsuit comes after the European Union’s antitrust regulator found in 2014 Mastercard’s fees to store owners to process international payments within the EU were excessive.Law firm Quinn Emanuel said the lawsuit was the largest damages claim in British history and would be brought under a law meaning consumers would automatically be claimants unless they opt out. Any person living in Britain who used a credit card, cash or cheques and was over 16 years old in the period covered by the lawsuit will automatically be part of the claim.If the 14 billion pound claim was shared equally between the number of eligible claimants, each person could receive more than 300 pounds each, according to a Reuters’ calculation.A lawyer working on the case said Mastercard charged shops fees in excess of 1 percent for card use on international transactions between 1992 and 2008.Although the EU’s anti-trust regulator only ruled Mastercard’s international fees were illegal, this impacted British consumers as it was the default fee used in Britain.

Two years ago, the European Union capped the fees retailers pay at 0.2 percent for debit cards and 0.3 percent for credit cards. Merricks in a statement said the case is a watershed moment for consumer compensation in Britain.Merricks was head of Britain’s financial services ombudsmen for ten years until 2009, helping to settle disputes between consumers and financial services companies. Britain’s banks have been caught in a range of misspelling cases in the last five years. They have paid 24 billion pounds in compensation for mis-selling loan payment insurance, making it Britain’s costliest scandal in financial services.Consumers no longer living in Britain, but who lived in the country between 1992 and 2008, can opt in to the collective claim against Mastercard.Any hearing on the case is not expected until early 2018, unless MasterCard settle it out of court.

($1 = 0.7523 pounds)

(Editing by Mark Potter and Alexander Smith)

Wall Street to open lower after North Korea test, Fed comments

By Chuck Mikolajczak

NEW YORK (Reuters) – U.S. stocks were poised for a lower open on Friday amid investor caution following a nuclear test by North Korea and comments by a U.S. Federal Reserve official that supported an interest rate hike.

North Korea conducted its fifth and biggest nuclear test on Friday and said it had mastered the ability to mount a warhead on a ballistic missile, drawing condemnation from the United States as well as China, Pyongyang’s main ally.

“The timing of North Korea flexing their nuclear muscles is interesting in that it comes on the heels of the leader of the free world’s trip to Asia,” said Art Hogan, chief market strategist at Wunderlich Securities in New York, referring to President Barack Obama, who arrived in Asia last week to attend a G20 meeting before touring other Asian nations.

“So that is in and of itself kind of insulting but it’s also disturbing if they are making significant traction here, but it’s hard to know.”

Futures extended losses after Boston Fed President Eric Rosengren, a historically dovish policymaker, said the Federal Reserve increasingly faces risks if it waits too much longer so a gradual policy tightening is likely appropriate.

S&P 500 e-minis <ESc1> were down 11.75 points, or 0.54 percent, with 148,435 contracts changing hands. Nasdaq 100 e-minis <NQc1> were down 28.25 points, or 0.59 percent, in volume of 15,946 contracts and Dow e-minis <1YMc1> were down 101 points, or 0.55 percent, with 16,420 contracts changing hands.

At 9:30 EDT (1330 GMT), Federal Reserve Bank of Dallas President Robert Kaplan, a non-voting member, is scheduled to speak.

The Fed will hold a two-day policy meeting on Sept. 20-21. Expectations for a rate hike had climbed in recent weeks after comments from a number of Fed officials, only to be tamped down again in the past several days after a host of disappointing economic reports. The current expectations for a September rate hike stand at 18 percent, according to CME’s FedWatch tool.

U.S. stocks have been subdued for two months, with the benchmark S&P 500 index failing to register a move of more than 1 percent on a closing basis in either direction since July 8. The index is still only 0.4 percent away from its last record high registered on Aug. 15.

Data due on Friday includes July wholesale inventories at 10 a.m. EDT (1400 GMT), which are not expected to have changed from the prior month.

Also due is the weekly rig count from Baker Hughes, which could impact the price of oil after both Brent <LCOc1> and U.S. <CLc1> prices surged more than 4 percent Thursday in the wake of a surprisingly huge drawdown in U.S. crude stocks.

Restoration Hardware <RH.N> shares surged 10.3 percent to $38.94 in premarket trading after the company posted second-quarter earnings that topped Wall Street expectations.

Pipeline company Enterprise Products Partners <EPD.N> late Thursday withdrew its takeover bid for rival Williams Cos Inc <WMB.N>, saying Williams’ lack of engagement left it with “no actionable path forward.”

(Reporting by Chuck Mikolajczak; Editing by Bernadette Baum)

New Caspian oil fields to add to glutted global market

Oil rig and infrastructure of D Island are pictured at Kashagan offshore oil field in Caspian sea in western Kazakhstan

By Olga Yagova and Alla Afanasyeva

MOSCOW (Reuters) – Two new Caspian Sea oil fields are due by the end of this year to add significant volumes of crude to a world market already in glut, possibly depressing prices just as producers including Russia talk about reviving them.

According to industry sources and a loading schedule seen by Reuters, the Kashagan field in Kazakhstan’s sector and Lukoil’s Filanovsky field in the Russian sector – both of which are scheduled to come on stream soon – will together produce at least 200,000 barrels of crude per day (bpd) by the end of 2016.

By the end of next year, according to targets previously announced by the fields’ operators, Kashagan and Filanovsky will between them produce about 500,000 bpd, equivalent to about 0.5 percent of global production.

Faced with world oil prices languishing at around $50 per barrel, Saudi Arabia and Russia – the world’s two biggest crude exporters – agreed on Monday to cooperate in world oil markets. Though they will not act immediately, they said they could limit output in the future.

The agreement pushed up prices on expectations that exporters would work together to tackle the glut. However, on Thursday Brent crude <LCOc1> was trading around $48.50.

The Caspian crude will come on top of extra oil from Iran, which is working to raise its exports back to around 2.4 million bpd, the amount it used to sell before sanctions aimed at curbing its nuclear programme were imposed. International sanctions were lifted earlier this year on implementation of a deal between Tehran and world powers.

Production at the long-delayed and hugely expensive Kashagan offshore project – the world’s biggest oil find in 35 years – will start in October this year, according to industry sources who have seen Kazakh Energy Ministry documents on the field.

Output will initially be 75,000 bpd in October, rising to between 150,000 and 180,000 in the November-December period of this year, the sources told Reuters, citing the ministry documents.

Asked about the plan, a spokeswoman for North Caspian Oil Company, the Kashagan operator, declined to give a breakdown of production figures for this year.

The Kashagan consortium comprises China National Petroleum Corp., Exxon Mobil of the United States, Italy’s Eni, Anglo-Dutch Royal Dutch Shell, Total of France, Inpex of Japan and Kazakh firm KazMunaiGas.

The project began producing oil in September 2013 but stopped a few weeks later after gas leaks in its pipelines.

$55 BILLION INVESTMENT

Filanovsky will export around 50,000 bpd of CPC blend, a light Caspian crude, between October and December this year, according to a loading schedule, a copy of which was obtained by Reuters.

Representatives of Lukoil confirmed that production would start this year, but declined to give figures for volumes.

The planned new Caspian production from the two members of the Commonwealth of Independent States (CIS), which groups most ex-Soviet countries, shows how difficult it will be for exporters to curb output, especially when commercial interests outweigh the wishes of government officials.

The Kashagan field is five years behind schedule and costs have rocketed. By the end of 2015, the amount invested in its first phase had reached $55 billion, according to the project’s operator.

“While Russia is lulling the world with stories about a freeze in production in order to stabilise prices, on its territory and in the countries of the CIS new fields are continuing to come on stream and it doesn’t look like anyone can do anything to stop it,” said an industry source who spoke on condition of anonymity.

(Editing by Christian Lowe and David Stamp)

World Stocks hit one year high as Fed hike prospects fade

Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany,

By Nigel Stephenson

LONDON (Reuters) – World stocks hit their highest in more than a year and the dollar fell sharply against the yen on Wednesday as expectations of a rise in Federal Reserve interest rates receded after weak U.S. economic data.

Emerging market shares led the charge, touching their strongest levels since July 2015 as investors sought yield with interest rates likely to stay low for a prolonged period.

But European shares dipped in early trade. The Stoxx 600 index fell 0.2 percent led lower by banks, for whom rock-bottom interest rates promise tough times. The index nonetheless remained close to eight-month highs.

The top gainers in Europe were energy shares, up 0.7 percent, as oil prices rose, even though many market participants remained doubtful producers would reach a deal to freeze output.

Euro zone government bond yields fell as some investors bet the weak U.S. data, which followed weaker-than-expected jobs numbers on Friday, would pressure the European Central Bank to ease monetary policy further. Then ECB meets on Thursday.

“With a September rate hike looking less likely to happen, the ECB might be more pressured to come up with a decision this week on further measures,” said Benjamin Schroeder, senior rates strategist at ING.

In Asia, MSCI’s main Asia-Pacific stock index, excluding Japan was up 0.2 percent, having earlier touched its highest since July last year. This helped lift MSCI’s all-country world index to its highest since August 2015.

“When people think there’s no immediate rate hike from the Fed, then Asia and emerging markets are the place to go to, as investors seek yields,” said Toru Nishihama, senior economist at Dai-ichi Life Research.

Japan’s Nikkei index , however, retreated 0.4 percent as a strong yen hurt exporters.

DOLLAR, OIL

The dollar was last down 0.5 percent at 101.50 yen <JPY=>, having fallen as low as 101.18, its weakest since Aug. 16.

The dollar fell 1 percent against several major currencies on Tuesday after Institute for Supply Management data showing activity in the U.S. service sector slowed to a 6 1/2-year low in August and diminished already slim prospects for a Fed rate hike this month.

The dollar index, which measures the greenback against a basket of major currencies was flat. The euro was down 0.1 percent at $1.1245 while sterling, which topped $1.34 for the first time in seven weeks on Tuesday after the ISM data, pulled back 0.2 percent to $1.3412.

“Clearly, this is a challenging environment for the dollar,” said Petr Krpata, currency strategist at ING.

The Swedish crown rose around 0.2 percent to 9.52 per euro after the Swedish central bank kept interest rates unchanged, as expected.

Oil prices, which have been on a rollercoaster in recent days as expectations of whether a deal to curb a global glut can be reached have waxed and waned, edged up.

Brent crude, the international benchmark, gained 35 cents to $47.61 a barrel. It rose as high as $49.40 on Monday, having fallen to $45.32 on Sept. 1.

The reduced expectations of a Fed hike also lifted other commodities. Copper hit a two-week high at $4,683 a ton, while gold hit a 2 1/2-week peak above $1,352 an ounce before pulling back.

For Reuters new Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

Dollar falls after weak U.S. economic data cuts Fed rate hike bets

By Dion Rabouin

NEW YORK (Reuters) – The dollar tumbled on Tuesday after economic data showed the U.S. service sector grew at its slowest pace since early 2010, which dimmed expectations for a near-term interest rate increase from the Federal Reserve.

The dollar fell to a one-week low against the Japanese yen after the data, and the British pound rose to its highest level against the dollar since mid-July.

The Institute for Supply Management’s non-manufacturing purchasing managers’ index fell to 51.4 last month, far short of economists’ expectations and the largest one-month drop since November 2008.

“When you pair that with data we got Friday, which was non-farm payrolls, disappointing some, what it does is it starts to kick back interest rate expectations past the September meeting and even lowering them in December too,” said John Doyle, director of markets at Tempus Inc in Washington.

“You’re seeing slightly softer data over the last couple of trading sessions equals less likelihood the Fed will raise rates at the meeting this month and with that comes a slightly weaker dollar.”

The service sector makes up more than two-thirds of the U.S. economy.

Friday’s U.S. non-farm payrolls report showed employers in the United States added 151,000 jobs last month, missing economists’ expectations and falling well below readings in June and July, which both showed more than 250,000 jobs added in each month.

On Tuesday, the dollar fell more than 1 percent against the yen, slipping to 102.05 yen per dollar.

The British pound rose by 1 percent against the dollar, touching a fresh seven-week high at $1.3443. The euro rose to $1.1255, its highest since Aug. 26 after the data.

The dollar index dropped 1 percent to 94.821, its lowest since Aug. 26.

The New Zealand dollar was the biggest gainer among major currencies, rising 1.4 percent against its U.S. counterpart to its highest level since May 2015. The kiwi was boosted by the weak U.S. data and a rise in milk prices after a strong dairy auction in New Zealand.

The Australian dollar jumped 1.3 percent against the greenback after the data. The Aussie was also bolstered by the Reserve Bank of Australia’s decision to leave interest rates unchanged at 1.5 percent and minimal commentary from the central bank on the currency’s 10 percent rise against the U.S. dollar since January.

(Reporting by Dion Rabouin; Editing by David Gregorio)

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