December 1, 2023

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Stocks are rising and the dollar is falling ahead of the inflation data

Stocks are rising and the dollar is falling ahead of the inflation data

LONDON (Reuters) – Global stocks rose and the dollar fell on Tuesday, ahead of US inflation data that could support a faster end to the Federal Reserve’s rate hikes, while prospects for China’s support for economic growth helped lift commodity prices such as oil and copper. .

Markets await US inflation data on Wednesday to see if price pressures continue to moderate, which could provide clues to the interest rate outlook.

The MSCI All-World Index (.MIWD00000PUS) rose 0.3%, supported by gains in European stocks, with the STOXX 600 Index (.STOXX) rising 0.35% in early trading, and by Chinese stocks in Asia, after extending support to European stocks. Real estate sector.

US stock index futures rose 0.1-0.2%, indicating a modest rally at the opening bell.

Investors were digesting comments from several Federal Reserve officials on Monday who said that the level of inflation justifies additional interest rate hikes, but that the central bank is nearing the end of the current monetary tightening cycle.

Economists polled by Reuters expect the consumer price index to have risen 3.1% in June, after a 4% increase in May. This would be the lowest reading since March 2021. The base rate for the third month is expected to drop to 5% from 5.3%, but that’s still more than double the Fed’s target of 2%.

Last week’s employment report showed that much fewer workers than expected were added to non-farm payrolls last month, prompting a wave of US dollar selling, but doing little to change direction in terms of interest rate expectations.

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“The (market) moves, especially between the jobs report and inflation when they’re so close together, I take with a pinch of salt,” said Craig Erlam, market analyst at OANDA.

“There is an intense eye on inflation data tomorrow – coming in late today for the July meeting. This rally is basically tight and it would take something very weak on the inflation side to change that,” he said.

economic inflation

Shiny dollar

The dollar index, which measures the performance of the US currency against six others, fell 0.2% on the day and is near its lowest level in two months, in line with a decline in US Treasury yields.

The yield on the benchmark 10-year note fell 4 basis points to 3.964%, after breaking below 4% a day earlier.

“While there is growing evidence of anti-inflationary trends in the near term, questions remain about whether inflation will persist at uncomfortably high levels in the medium term,” said Jim Reid, strategist at Deutsche Bank.

The Japanese yen rose to a one-month high against the dollar, leaving the greenback down 0.6% on the day at 140.51, tracking declines in Treasury yields.

Meanwhile, the prospect of a strengthening of the broader Chinese economy has helped drive prices for crude oil and other industrial commodities such as copper and iron ore.

Chinese regulators on Monday extended some of the policies in a bailout package introduced in November to shore up liquidity in the beleaguered real estate sector.

Brent crude, which struggled to pull back from 18-month lows, rose 0.4% to $78 a barrel, while US futures rose 0.5% to $73.35.

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Copper gained 0.5% on the London Metal Exchange, trading at around $84,000 a ton. The price is heading for its first annual loss since 2018, due in large part to erratic demand from China.

Second-quarter earnings were released this week, with results due from some of the biggest institutions on Wall Street, including JPMorgan (JPM.N), Citigroup (CN), and Wells Fargo (WFC.N).

Analysts expect earnings to contract 6.4% in the second quarter year over year, according to IBES data from Refinitiv.

Additional reporting by Julie Zhou in Hong Kong. Editing by Sam Holmes, Jamie Freed, and David Evans

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