[1/3] Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, May 4, 2023. REUTERS/Brendan McDiarmid
SINGAPORE (Reuters) – Stocks fluctuated, oil prices initially recovered and bond yields fell on Wednesday after data showed U.S. consumer prices rose in April at a slower-than-expected pace, evidence of the Federal Reserve’s success in its inflation. fights.
The Labor Department said the Consumer Price Index rose 0.4% after gaining 0.1% in March, while the Consumer Price Index rose 4.9% in the 12 months through April, after advancing 5.0% year-on-year in March.
Futures showed that the probability of the Fed raising interest rates again in June fell to 13.1% from 21.9% shortly before the data was released, according to CME Group’s FedWatch tool. The possibility of the Fed cutting interest rates later this year has increased.
Shelter, a large component of the consumer price index, came in slightly weaker, said Priya Misra, head of global price strategy at TD Securities in New York, which gave markets relief as some people were looking for a stronger number.
“There is a big caveat, it came weaker because of the hotels, not because of the rents,” Misra said. “Maybe the market is cheering up here because inflation is on the way down. It is, but we think it’s going to be a little sticky on the way down,” she said, adding, “The market might bring it back.”
The two-year Treasury yield, which usually moves according to interest rate expectations, fell from around 4.05% before the news and was last trading 8.7 basis points lower at 3.937%.
The dollar slipped as the data boosted expectations that the Federal Reserve will halt interest rate hikes to curb soaring inflation, while crude oil futures gave up initial gains on the back of the data amid fears of rising US inventories showing weak demand.
The dollar index fell 0.108%, while the euro rose 0.1% to $1.0971.
Equity markets initially rallied as CPI data indicated that the Fed’s most aggressive rate hike in four decades was paying off.
The MSCI measure of equities worldwide (.MIWD00000PUS) fell 0.06%, while stocks on Wall Street fluctuated after an early rally.
The Dow Jones Industrial Average (.DJI) was down 0.42%, the S&P 500 (.SPX) was up 0.03%, and the Nasdaq Composite (.IXIC) was up 0.57%.
In Europe, the pan-European STOXX 600 index (.STOXX) lost 0.41%.
John Lieber, chief investment officer of Titan Asset Management, said the market reaction is positive because it is “very focused on ‘pauses’, but pauses are still restrained overall.”
Headwinds still loom for the world’s largest economy, with lawmakers deadlocked over the approaching US debt ceiling.
President Joe Biden and top lawmakers have failed to break the deadlock over raising the $31.4 trillion US debt limit, but they have vowed to meet again before June, when the Treasury expects it will begin to struggle to meet its commitments.
China crisis
The foreign exchange markets were doing well as markets were weighing the rhetoric of policy makers against the conviction of traders that US interest rates should come down.
Emerging market currencies rose on Wednesday after the US data, with the MSCI Index (.MIEM00000CUS) up 0.15%.
Expectations of a rate cut were misplaced, but that didn’t give the euro much of a boost, European Central Bank Governing Council member Isabel Schnabel said on Tuesday, as traders were reluctant to aggressively sell dollars ahead of CPI data.
China’s weak import figures for April sent Chinese and Hong Kong stocks lower for the second straight session, as investors fear the market’s rebound from reopening the economy is fading into an uneven rebound.
Hong Kong’s Hang Seng fell 1.3% and the yuan fell to a two-week low.
A crackdown on corporate due diligence appears to be irritating the sector and upsetting investors. Reuters reports that CICC Capital, a unit of leading Chinese investment bank China International Capital Corp (3908.HK) has stopped using advisory firm Capvision.
US crude recently fell 2.06% to $72.19 a barrel, and Brent crude was $76.00, down 1.86% on the day.
Spot gold fell about 2% to $2,030.39 an ounce.
Editing by Simon Cameron Moore
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