US stock futures and bond prices dropped on Tuesday and the dollar rose, after widely anticipated US inflation data for August came in higher than expected.
Futures contracts tracking Wall Street’s broad S&P 500 share gauge fell 1.5 per cent, while those following the Nasdaq 100 — which is stacked full of tech companies that are more sensitive to changes in interest rate expectations — dropped 2.2 per cent.
Those moves came after a report on Tuesday showed US consumer prices ticked up 0.1 per cent in August from the previous month, compared with expectations for a fall of 0.1 per cent. The annual rate came in at 8.3 per cent, down from 8.5 per cent in July, but still higher than the 8.1 per cent Wall Street economists forecast.
Core consumer price growth — which strips out volatile items such as energy and food — rose from 5.9 per cent to 6.3 per cent.
In government debt markets, the yield on the two-year US Treasury note jumped 0.11 percentage points to 3.68 per cent, reflecting a steep drop in the price of the bond. The 10-year yield rose 0.06 percentage points to 3.42 per cent. The dollar jumped 0.7 per cent against a basket of six peers.
Tuesday’s inflation report was hotly anticipated ahead of the US Federal Reserve’s next monetary policy meeting in late September. Markets are pricing in the probability of a third consecutive 0.75 percentage point interest rate rise by the central bank and for further aggressive rate rises in November and December. The Fed’s current target range stands at 2.25 to 2.50 per cent.
In Europe, the regional Stoxx 600 dropped 0.1 per cent, having climbed 1.8 per cent in the previous session. London’s FTSE 100 also lost 0.1 per cent.
In Asia, China’s mainland CSI 300 index rose 0.4 per cent but Hong Kong’s Hang Seng slipped back 0.2 per cent as markets in greater China reopened following a national holiday. Japan’s Topix rose 0.3 per cent.
Kristina Hooper, chief global market strategist at Invesco, said the US economy was “still fundamentally sound” but added that the Fed “has readily admitted that it will take time for the negative effects of tightening thus far to show up in the economy”.
Source: Economy - ft.com
