Global Stock Markets Plummet On Interest Rate, Clinton Health Concerns

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This story was updated 9/12/2016 4:45 pm ET.

Panic roiled the global stock markets Monday morning on a signal from the U.S. Federal Reserve that interest rates could rise sooner than expected, and on concerns about the health of U.S. presidential candidate Hillary Clinton.

But North American markets rebounded and ended the day in the black after further comments from the Fed suggested rate hikes may yet be a way off.

KEEPING SCORE: In Europe, Germany's DAX was down 1.8 per cent at 10,384 while the CAC-40 in France fell 1.8 per cent to 4,412. The FTSE 100 index of leading British shares was 1.5 per cent lower at 6,672. U.S. stocks, which had their worst day in two months last Friday, were also poised for further losses at the bell with Dow futures and the broader S&P 500 futures down 0.4 per cent.

NORTH AMERICAN MARKETS REBOUND: After a jittery start to the trading day, North American stock markets rallied Monday after a U.S. Federal Reserve official hinted that the central bank remains cautious about interest rate hikes. Fed governor Lael Brainard reassured investors after she said in a speech that the risk with raising rates too soon was that it could damage the fragile economy by igniting inflation.

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Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., August 30, 2016. (Photo: Reuters/Lucas Jackson/File)

FED FEARS: The main reason behind the widespread selling in markets over the past couple of sessions is a growing fear that the U.S. Federal Reserve may be nearer to raising rates again than previously thought. Investors seized on remarks Friday by Fed Bank of Boston President Eric Rosengren that there's a case to be made for the U.S. central bank to raise rates sooner rather than later -- low rates have helped extend the stock market rally. The Fed, which last raised rates at the end of 2015, is due to meet next Sept. 20-21. Before Rosengren's remarks, expectations of a rate hike then were low.

CLINTON CAUTION: Clinton's abrupt departure from a 9-11 anniversary ceremony on Sunday added an extra element of uncertainty to already fragile global sentiment. The damage was compounded by the nearly eight hours of silence from Clinton and her team about the health scare, as well as the Sunday evening disclosure she had been diagnosed on Friday with pneumonia. The episode focused attention on Clinton's health eight weeks ahead of the election against Donald Trump.

hillary clinton overheated
Democratic presidental nominee Hillary Clinton arrives with an unidentified woman at the September 11 Commemoration Ceremony at the National September 11 Memorial & Museum on September 11, 2016 in New York City. Hillary Clinton left the ceremony early after feeling overheated and went to her daughter's house to rest. (Photo: Justin Sullivan/Getty Images)

ANALYST TAKE: "Indices are down sharply as investors react to heightened fears about, firstly, a Fed rate hike next week and what it means for diverging global monetary policy, and, secondly, a new layer of political event risk as questions are asked about the health of Clinton and what that means for an already 'interesting' U.S. presidential race,'' said Mike van Dulken, Head of Research at Accendo Markets.

GALAXY RECALL: Shares of Samsung Electronics tanked 7 per cent to their lowest level in almost a month, after the company urged consumers globally to stop using its Galaxy Note 7 phone. The South Korean electronics giant is grappling with the fallout from an unprecedented recall of 2.5 million of its newest smartphones after several dozen of them caught fire. Over the weekend, the company urged users to return them for a replacement and a number of airlines said they would be banned.

ASIA'S DAY: Japan's benchmark Nikkei 225 index lost 1.7 per cent to 16,672.92 and South Korea's Kospi slid 2.3 per cent to 1,991.48. Hong Kong's Hang Seng shed 3.4 per cent to 23,290.60 and the Shanghai Composite Index fell 1.8 per cent to 3,021.98. Australia's S&P/ASX 200 sank 2.2 per cent to 5,219.60, while the Sensex in India dropped 1.4 per cent to 28,381.64.

ENERGY: The early-week uncertainty weighed on oil prices too, with the benchmark New York rate down 91 cents at $44.97 a barrel. Brent, which is used to price international oil, fell 99 cents to $47.02 a barrel.

CURRENCIES: The euro was down 0.1 per cent at $1.1224 while the dollar fell 0.8 per cent to 101.90 yen.

— With a file from The Canadian Press

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