- Global stock index turns positive
- The currency market is stable
- US CPI comes in at 4.9% versus 5% expectations
SINGAPORE, May 10 (Reuters) – Stocks fell, oil prices rebounded early and bond yields fell on Wednesday after data showed U.S. consumer prices rose at a slower-than-expected pace in April. fight
The Consumer Price Index rose 0.4% after rising 0.1% in March, the Labor Department said, adding that CPI rose 4.9% in the 12 months to April, after advancing 5.0% on a year-over-year basis in March.
According to CME Group’s FedWatch tool, futures show the probability of the Fed raising rates again in June from 21.9% to 13.1%. The likelihood of the central bank cutting rates later this year has increased.
Shelter, a major component of the CPI, was slightly weaker, giving relief to markets as some looked for a stronger number, said Priya Mishra, head of global rates strategy at TD Securities in New York.
“There is one big caveat, which is that the weakness came from hotels, not because of rents,” Misra said. “The market may be happy here that inflation is coming down. It is, but we think there will be some stickiness on the way down,” he added, “and the market may give it back.”
Two-year Treasury yields, which typically move in step with rate expectations, fell from around 4.05% before the news and last traded down 8.7 basis points at 3.937%.
The dollar retreated as expectations that the central bank would pause its interest rate hikes to curb high inflation strengthened, while crude oil futures showed weaker demand as a rise in US inventories.
The dollar index fell 0.108%, while the euro rose 0.1% to $1.0971.
Stock markets rose early as CPI data suggested the central bank’s most aggressive rate hikes in four decades were coming to fruition.
MSCI’s gauge of stocks around the world (.MIWD00000PUS) fell 0.06%, while shares on Wall Street were wobbly after an early rally.
The Dow Jones Industrial Average (.DJI) fell 0.42%, the S&P 500 (.SPX) rose 0.03% and the Nasdaq Composite (.IXIC) added 0.57%.
In Europe, the pan-European STOXX 600 index (.STOXX) lost 0.41%.
John Lieber, chief investment officer at Titan Asset Management, said the market “reacted positively as the ‘pause’ is over-fixed, but overall a pause is still controlled.”
The world’s largest economy faces more headwinds as lawmakers deadlock over the looming U.S. debt ceiling.
President Joe Biden and top lawmakers have failed to break the deadlock on raising the $31.4 trillion U.S. debt ceiling, but have promised to meet again before June, when the Treasury begins to struggle to meet its obligations.
Foreign exchange markets were treading water as markets weighed rhetoric from policymakers against traders’ hopes for a cut in US interest rates.
MSCI’s index (.MIEM00000CUS) rose 0.15% as emerging markets currencies rallied on Wednesday following U.S. data.
European Central Bank board member Isabelle Schnabel said on Tuesday that expectations of a rate cut were misplaced, but that did not provide much of a boost to the euro as traders were reluctant to sell dollars in excess of the CBI data.
China’s weak import figures for April kept Chinese and Hong Kong stocks on hold for a second straight session, with investors hoping the market rebounded since the reopening of the economy, fading in a patchy recovery.
Hong Kong’s Hang Seng fell 1.3% and the yuan fell to a two-week trough.
The apparent crackdown on companies performing due diligence has shaken the sector and worried investors. CICC Capital, a unit of top Chinese investment bank China International Capital Corp ( 3908.HK ), has stopped using consultancy Capvision, Reuters reported.
US crude recently fell 2.06% to $72.19 a barrel, while Brent was at $76.00, down 1.86% on the day.
Spot gold was down about 2% at $2,030.39 an ounce.
Editing by Simon Cameron-Moore
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