August registers worst month for US stock markets in three years

China’s economy is not the only thing that is worrying Stateside investors, as a potential US rate rise is also looming.

The result has been the worst August in three years for US stock markets, with the Dow off 114 points, S&P 500 down 16 and Nasdaq falling 52 all in the same day.

Rate rise

As the Federal Reserve considers the first rate increase in ten years and China's economic troubles continue to ripple around the world, investors reacted with confusion and uncertainty.

The Federal Reserve vice-chairman Stanley Fischer has suggested that an increase in interest rates could come sooner than some expected.

Later this week, the Labor Department will release its non-farm payroll jobs report for the month of July, and experts are predicting that it will show an increase of around 200,000 new jobs. However, good news on jobs means more pressure for introducing the first interest rate rise since the recession.

Strong case

At an annual central bankers conference event held in Jackson Hole, Wyoming, Fischer said inflationary pressures were increasing and that there was now a “pretty strong case” for an increase in rates.

After the comments, Barclays strategist Krishna Goradia advised investors they had “likely led to markets pricing a higher probability (now 32%) of a Fed move next month.”

Recent figures from the Commerce Department said the US economy grew ahead of forecasts in the second quarter at an annualised rate of 3.7%. Stronger consumer spending has been the result of a recovering housing market, good jobs growth and low global oil prices.