Barclays pushes back date of first Fed rate hike as markets reel

The Footsie was pummelled on Monday, registering a tenth consecutive session of losses, the longest such streak since January 2003, even as analysts pushed back their forecasts for Fed tightening.

The previous week's sharp losses on the Shanghai Stock Exchange's Composite Index carried over into the Monday session, with a couple of veteran analysts pointing out the failure of Beijing to announce new stimulus measures over the weekend nor to support the benchmark index at the 3,500 point mark.

The Shanghai index ended the day 8.49% lower at 3,209.91 points while the top flight index experienced its biggest retreat since March 2009, the same month that the S&P 500 hit its bottom during the past financial crisis.

Tellingly, Wall Street's so-called fear gauge, the VIX, soared 31.43% to 36.85 on Monday. However, on an intra-day basis it hit a high at 53,29, according to Bloomberg data, an enormous and highly erratic jump, having failed to update for thirty minutes due to the disjointed nature of trading.

Nonetheless, by 17:17 the S&P 500 had managed to pare its losses substantially and was off by just 1.34% to the 1.944.42 point mark.

Fed to raise rates in September of 2015; no, make that March (of next year)

Expectations that the US Federal Reserve might push back the date of its first rate hike may have played a hand.

"We move our call to for the first rate hike from September 2015 to March 2016. Given the uncertainty around the current global outlook, the timing of the rate hike seems more uncertain than usual. Should this episode of financial market volatility prove transitory, the FOMC could raise rates in December," economists at Barclays said in a research note e-mailed to clients.

So-called 'core' sovereign bond markets were seeing little price action, with the yield on the benchmark 10-year US Treasury note down by just two basis points to reach 1.99%.

However, earlier in the day three-month copper futures had slipped further below the psychological $5,000 per metric tonne mark in LME trading.

Acting as a backdrop, spot euro/dollar jumped 1.86% to 1.1589.

Some analysts differed in their assessments

Despite the sharp moves seen in global capital markets, analysts continued to provide very mixed assessments of the situation.

On the more cautious end of the spectrum, the research team at RBS led by Alberto Gallo had this to say: "The US economy has lost some momentum too, although it is in a much better position than the rest of the world, having been able to reduce its private debt overhangs. But the rest of the world looks increasingly vulnerable to a reduction in Fed stimulus – EM in particular, having continued to borrow throughout the crisis, as shown above.

"The contagion from China is deep and widespread with profound implications for both emerging and developed markets.

In a very skeptical vein, Erik F.Nielsen at Unicredit Research wrote to clients that: "Complete confusion on the back of very little new information. But all news is now (apparently) bad news. It feels like a severe episode of market hypochondria. Not easy to cure, but a few deep breaths and a long walk might help. Panic certainly doesn't! I would be very surprised if this week doesn't end higher than present levels."