Global Stocks Start Week Subdued as Investors Await Clues on U.S. Rates

Global stocks struggled for direction Monday as investors sought clarity on the course of U.S. interest rates.

U.S. stocks bounced in and out of positive territory in early trading. The Dow Jones Industrial Average added 13 points, or 0.1%, to 17514 shortly after the opening bell. The S&P 500 was fractionally higher, and the Nasdaq Composite rose 0.2%.

The Stoxx Europe 600 slipped 0.4% in choppy trade, following a mixed session in Asia.

Federal Reserve Bank of St. Louis President James Bullard on Monday suggested there were more factors in favor of gradually raising U.S. interest rates than there were for holding steady.

Fed-fund futures, used by market participants to place bets on interest-rate policy, suggested a 26% probability of a rate rise in June, according to data from CME Group.

Even as the Fed indicated it may raise rates in the coming months, investors remain cautious about the health of the U.S. economy.

“The Fed has put itself into play as opposed to economic data putting the Fed into play,” said John Brady, managing director at futures brokerage RJ O’Brien.

Corporate earnings for the first three months of the year declined, marking the fourth consecutive quarter of contracting earnings, according to FactSet. Economic growth remains meager, with inflation broadly appearing soft.

ENLARGE

James Bullard, president of the Federal Reserve Bank of St. Louis, suggested there were more factors in favor of gradually raising U.S. interest rates than there were for holding steady. Photo: Bloomberg News

Other market participants, however, have suggested stocks could weather a rate rise, citing several recent gauges of economic health have shown improvement, including wage growth and housing sales.

In Europe, the chemicals sector fell 1.2% and shares of Bayer fell 3.9% after the German pharmaceutical and chemicals giant said it had made an all-cash offer to acquire Monsanto MON 5.13 % for $62 billion.

Shares in energy companies also fell as Brent crude dropped 1.7% to $47.88 a barrel on concerns that recent supply disruptions may soon abate.

Greece’s Athex Composite gained 1.5%, however, after the country’s parliament approved tax and austerity measures needed to secure further loans.

Shares in Asia were mixed after finance ministers and central bank chiefs ended a two-day meeting without a coordinated policy to boost economic growth.

Differences between the U.S. and Japan over intervention to stem a recent rise in the yen surfaced again Saturday, helping send the dollar down 0.6% against the yen to ¥109.4360.

“While Japan could intervene, the bar seems high, especially ahead of the heads of state summit next weekend,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman said in a note.

The euro slipped 0.2% against the dollar at $1.1202. Data Monday showed private sector activity in the eurozone slowed slightly in May, suggesting growth softened in the second quarter.

The British pound fell 0.2% against the dollar to $1.4466 after the U.K. Treasury said the U.K. economy could fall into a yearlong recession if the country votes to leave the European Union in a June referendum.

Earlier, stocks in Japan ended 0.5% lower as the stronger yen weighed on shares of exporters. Data also showed Japanese exports declined 10% in April, as the country continued to face headwinds from weaker demand and a stronger currency.

Shares in Australia fell 0.6% as lower iron-ore futures prices weighed on shares of mining companies.

The Shanghai Composite Index ended 0.6% higher on signs that regulators were eager to limit new shares coming to the market.

—-Takashi Nakamichi and Corrie Driebusch contributed to this article

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