U.S. stock markets and the dollar climbed on Monday while European share markets fell, following comments by top Federal Reserve officials that bolstered expectations for an interest rate hike by the U.S. central bank this year.
Fed Chair Janet Yellen said on Friday the case for a rate increase was strengthening, but provided little detail on when the Fed would next move. Vice Chair Stanley Fischer suggested on CNBC that a rate hike as soon as next month was possible.
The advance in the U.S. stock markets was led by financials, which stand to gain the most in an environment of higher interest rates. The S&P 500 financial index <.SPSY> was last up 1.2 percent; Wells Fargo <WFC.N> gained 2.5 percent and JPMorgan <JPM.N> rose more than 1 percent. The advances put Wall Street on track to snap a three-day losing streak.
A report from the U.S. Commerce Department showed consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose for a fourth month in July. That reinforced bets of a rate rise soon, even as other data showed U.S. inflation remained subdued.
The dollar extended Friday's gains and reached a roughly three-week high against the yen of 102.39 yen <JPY=>.
European shares responded unfavorably to the rising expectations for a 2016 Fed rate hike, with the pan-European STOXX 600 index <.STOXX> ending down 0.15 percent.
"It is looking more likely that we will see a rate hike this year, and September is a good possibility," said Richard Sichel, chief investment officer of Philadelphia Trust Co in Philadelphia. "A pickup in consumer spending, on durables especially this time around, gives the Fed another little push."
The chances of a rate hike in September jumped to 30 percent from 21 percent, according to CME Group's FedWatch tool.
MSCI's all-country world equity index <.MIWD00000PUS> was last up 0.13 points, or 0.03 percent, at 418.55.
The Dow Jones industrial average <.DJI> was last up 120.01 points, or 0.65 percent, at 18,515.41. The S&P 500 <.SPX> was up 13.43 points, or 0.62 percent, at 2,182.47. The Nasdaq Composite <.IXIC> was up 22.99 points, or 0.44 percent, at 5,241.91.
Europe's broad FTSEurofirst 300 index <.FTEU3> closed down 0.17 percent, at 1,350.4.
U.S. Treasury yields maturing between 2-10 years dipped on foreign demand after touching their highest levels since June on Friday. U.S. 30-year Treasury bond <US30YT=RR> yields also fell, with their prices rising more than a full point. Benchmark 10-year yields <US10YT=RR> were last at 1.575 percent, compared to 1.633 percent late Friday.
Oil prices fell, with benchmark Brent crude falling below $49 a barrel, pressured by high output from Middle East OPEC members and as a stronger U.S. dollar weighed on commodities.
"A much stronger U.S. dollar is causing selling pressure," said Carsten Fritsch of Commerzbank.
Brent crude <LCOc1> was last down 63 cents, or 1.26 percent, at $49.29 a barrel. U.S. crude <CLc1> was last down 69 cents, or 1.45 percent, at $46.95 per barrel.
Safe-haven spot gold <XAU=> slid to a near five-week low of $1,314.70 on the dollar's gains.
(Additional reporting by Anirban Nag and Alex Lawler in London and Dion Rabouin and Karen Brettell New York; Editing by Nick Zieminski and Bernadette Baum)