Global equity gauge rises slightly with inflation, rates in focus

  • Reuters
  • Stock Market News
Global equity gauge rises slightly with inflation, rates in focus
Credit: © Reuters

By Sinéad Carew

NEW YORK (Reuters) -A global equities index rose slightly on Thursday after falling earlier in the day while Treasury yields rose as investors looked to the latest inflation data for clues on the potential for Federal Reserve interest rate cuts.

A day after March's hot Consumer Price Index (CPI) reading sent equity investors to the exits, Thursday's data showed U.S. producer prices rose more slowly than expected last month with a cost of services increase blunted by falling goods prices. The producer price index (PPI) for final demand rose 0.2% versus economist expectations for 0.3% and a February increase of 0.6%.

But New York's Fed President John Williams said on Thursday that while the central bank has made considerable progress with inflation, it does not yet appear to need rate cuts. Richmond Fed President Thomas Barkin said the Fed is not yet where it wants to be to have confidence price pressure will keep easing.

"(Thursday) morning's PPI report came in softer than expected, lessening the blow of the disappointing CPI report (on Wednesday), which obviously shows that progress on disinflation is stalling," said Emily Roland, co-chief investment strategist at John Hancock Investment.

But while the Fed will have two more months of data to look at before it makes a rate decision in June, Roland said "markets are getting the memo that the Fed is likely not going to be able to cut anytime soon" and that "it's tough to see the case to cut rates."

On Thursday, traders were betting on a roughly 76% chance that the Fed will keep rates unchanged in June, versus 83.5% on Wednesday and an almost 51% chance they will stay the same in July compared with 57.6% on Wednesday, according to CME Group's (NASDAQ: CME ) FedWatch tool.

On Wall Street the Dow Jones Industrial Average fell 2.43 points, or 0.01%, to 38,459.08, the S&P 500 gained 38.42 points, or 0.74%, to 5,199.06 and the Nasdaq Composite gained 271.84 points, or 1.68%, to 16,442.20.

MSCI's gauge of stocks across the globe rose 2.10 points, or 0.27%, to 774.88 after falling earlier by 0.46%. Europe's STOXX 600 index closed down 0.4% earlier.

Yields on U.S. Treasuries pushed higher with two-year yields breaching 5% for the first time since November before edging down, as investors worried over rebounding inflation after Wednesday's data despite the softer-than-expected producer prices.

The yield on benchmark U.S. 10-year notes rose 2.2 basis points to 4.582%, from 4.56% late on Wednesday while the 30-year bond yield rose 3.8 basis points to 4.6723% from 4.634%.

The 2-year note yield, which typically moves in step with interest rate expectations, fell 1.7 basis points to 4.9524% after earlier hitting 5.012% as investors continued to digest the data from Wednesday.

"Typically when you get a big shock like that markets take about three days to normalize. Day two, we're still squaring some positions, some late tap-on-the-shoulder sellers are out there," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

In currencies, trading was choppy with the dollar last up slightly as weaker-than-expected March U.S. producer prices did not relieve concerns about persistent inflation which has fueled fears that the Fed will take its time cutting rates this year.

The dollar index gained 0.07% at 105.27, with the euro down 0.16% at $1.0725. Against the Japanese yen, the dollar strengthened 0.05% at 153.25.

The yen's recent slide against the dollar re-ignited intervention fears, as Japanese officials reiterated they would not rule out any steps to deal with excessive swings.

Oil prices settled lower as sticky inflation dampened hopes for near-term U.S. interest rate cuts, but worries that Iran might attack Israeli interests kept crude near six-month highs.

U.S. crude settled down 1.38% at $85.02 a barrel and Brent ended at $89.74 per barrel, down 0.82% on the day.

© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, April 2, 2024.     REUTERS/StaffFile Photo

Gold prices firmed after the inflation data while persistent geopolitical concerns added to the metal's shine.

Spot gold added 1.84% to $2,375.67 an ounce. U.S. gold futures gained 1.86% to $2,372.90 an ounce.

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