Stocks gain, yields fall after US inflation data

US consumer prices fall, labour data solid

By Reuters

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Traders work on the floor of the New York Stock Exchange. On Wall Street, equities were choppy after the data, with the S&P 500 falling as much as 0.8 per cent before rebounding. - AFP
Traders work on the floor of the New York Stock Exchange. On Wall Street, equities were choppy after the data, with the S&P 500 falling as much as 0.8 per cent before rebounding. - AFP

Published: Thu 12 Jan 2023, 9:42 PM

A gauge of global stocks rose on Thursday while US Treasury yields and the dollar fell after a reading of consumer prices fueled expectations the Federal Reserve may have room to dial back the size of its expected interest rate hikes.

U.S consumer prices unexpectedly fell for the first time in more than 2-1/2 years in December amid declining prices for gasoline and other goods, suggesting that inflation was now on a sustained downward trend.


Still, a separate reading on the labor market showed weekly initial jobless claims came in at 205,000, below expectations of 215,000. Many market participants are looking for signs of weakness in the labor market as a key sign of slowing inflation.

On Wall Street, equities were choppy after the data, with the S&P 500 falling as much as 0.8 per cent before rebounding.


The Dow Jones Industrial Average rose 120.63 points, or 0.36 per cent, to 34,093.64, the S&P 500 gained 2.43 points, or 0.06 per cent, to 3,972.04 and the Nasdaq Composite dropped 11.84 points, or 0.11 per cent, to 10,919.83.

“The as expected headline and core CPI print have really contributed to the notion that the Fed will be downshifting again, whether it’s at February or at the March meeting remains to be seen, and we’re going to be watching the incoming Fed speak for any guidance throughout the day in that regard,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York.

“The fact that we have seen core inflation decelerate to 5.7 per cent year-over-year, from 6 per cent in November, reinforces the peak inflation argument.”

The pan-European STOXX 600 index rose 0.75 per cent and MSCI’s gauge of stocks across the globe gained 0.45 per cent and was on track for a fifth straight session of gains, its longest streak since August.

Expectations for a 50 basis point rate hike at the next Federal Reserve meeting fell to 6.8 per cent according to CME’s FedWatch Tool, down from 23.3 per cent the day prior. The market is pricing in a 93.2 per cent chance of a 25 basis point hike, up from 76.7 per cent on Wednesday.

The benchmark US 10-year notes were down 3.9 basis points to 3.517 per cent, from 3.556 per cent late on Wednesday.

The dollar index hit its lowest level since early June before paring losses, and was last down 0.417 per cent, with the euro up 0.42 per cent to $1.08.

The Japanese yen strengthened 2.01 per cent versus the greenback at 129.85 per dollar, while Sterling was last trading at $1.2151, up 0.07 per cent on the day.

Crude prices rose in the wake of the data, getting an additional boost from optimism over China’s emergence from its Covid-19 restrictions creating additional demand.

US crude recently rose 1.11 per cent to $78.27 per barrel and Brent was at $83.78, up 1.34 per cent on the day.



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