Stocks Slow, Dollar Gains as Market Awaits Consumer Price Index (CPI) Data

Stocks Slow, Dollar Gains as Market Awaits Consumer Price Index (CPI) Data
Stocks Slow, Dollar Gains as Market Awaits Consumer Price Index (CPI) Data

Global stock markets were largely weak on Wednesday as investors waited for new inflation data to better gauge the likelihood of a Federal Reserve interest rate cut, while the dollar weakened slightly appreciated due to expectations of better economic performance in the United States.

European stocks hit a record high, boosted by corporate profits, but stocks on Wall Street fell as Uber’s negative forecast sent its shares down 8.1% and made the ride-hailing platform the biggest drop in the S&P 500.

The yen weakened for a third day and investors continued to be wary of intervention by Japanese authorities, while crude oil rose slightly from its lowest level in almost two months. In Europe, the Swedish crown was under pressure after the central bank cut rates as expected and said two more cuts were likely this year if inflation remained subdued.

The main concern for traders and investors is whether inflation is on track to reach the US central bank’s 2% target and when Fed Chairman Jerome Powell might cut rates.

Boston Fed President Susan Collins said Wednesday that the U.S. economy needs to cool down in order to bring inflation back to the central bank’s 2% target.

“The market is still looking forward to next Wednesday’s CPI report. We’re basically stuck in a range until we get the data back,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities At New York.

“Investors remain very cautious at this stage. They don’t want to extrapolate from a single data point or a few developments,” he added.

MSCI’s global stock index fell 0.19%, while Europe’s pan-regional STOXX 600 index rose 0.34% to a record close. On Wall Street, the Dow Jones Industrial Average rose 0.42%, the S&P 500 index lost 0.01% and the Nasdaq Composite index fell 0.18%.

Global stocks fell sharply in April as strong U.S. economic data prompted investors to reduce their bets on rate cuts from the Fed and, by extension, other major central banks this year.

But stocks rallied in May, partly buoyed by last week’s nonfarm payrolls figures, which showed a slowdown in the red-hot U.S. labor market but remained higher than data before the pandemic.

“Investors continue to underestimate or miscalculate interest rate cuts,” said Michael Arone, chief strategist for the U.S. SPDR business at State Street Global Advisors in Boston.

But if the economy is growing, inflation is anchored and the job market is reasonably strong, “the backdrop is pretty good for stocks,” he added. “Unless some of these ingredients change, markets will continue to do well.

In currency markets, the yen fell 0.59% to 155.53 per dollar, even after Bank of Japan Governor Kazuo Ueda said the central bank may take monetary policy measures whether currency falls affected prices significantly.

Japan has intervened in recent days to lift the currency from its lowest level in 34 years, keeping the market on alert for further fluctuations, according to traders and analysts.

The dollar index, which tracks the currency’s performance against six other currencies, rose 0.1% to 105.53, although it remains about 1% below a high of 5 month and a half reached in April. The euro was down 0.07% at $1.0744.

U.S. Treasury bond yields have fallen in recent days as traders began pricing in two Fed rate cuts this year, after considering a cut most likely in mid-April. The 10-year yield, which moves inversely to its price, increased by 2.9 basis points to 4.49%.

Oil prices edged higher after U.S. oil storage data showed a larger-than-expected reduction in crude inventories as refiners increased production ahead of the summer driving season.

U.S. crude rose 61 cents to $78.99 a barrel and Brent gained 42 cents to $83.58 a barrel.

Gold steadied as investors awaited clues on potential Fed rate cuts, although a slight rise in the dollar limited any upside.

Gold futures for June delivery fell 0.1% to $2,322.30 an ounce.

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