LONDON (Reuters) – Global shares and U.S. stock futures eased on Wednesday, shrugging off data that showed a key measure of U.S. inflation cooled in August, as it did little to change the outlook for Federal Reserve monetary policy in the near term.
U.S. stock index futures were last roughly flat on the day, having shown a 0.2-0.3% loss earlier, while dollar eased, after data showed the Consumer Price Index (CPI) rose by 3.7% in August, above expectations for a rise of 3.6% and after July’s 3.2% rate.
Core inflation, which is of greater concern to the Fed as it strips out food and energy prices, ran at a 4.3% year-on-year rate in August from 4.7% the previous month.
The increase in the headline rate was a function of a surge in the cost of gasoline, in line with the jump in oil prices to their highest in 10 months.
The MSCI All-World index was last down 0.1% on the day, compared with a 0.2% decline ahead of the data, while European stocks were down 0.6%, showing no change on pre-data levels.
“The move higher in headline inflation is a head-fake since it was mostly driven by a huge 10.5% jump in energy commodity prices,” said Brian Jacobsen, chief economist at Annex Wealth Management in Wisconsin.
“The head-fake can still be a headache for the Fed as they have to explain why inflation is trending lower despite what people are seeing at the pump,” Jacobsen added.
Markets have ruled out a hike next week, but have been split 50/50 on whether the central bank will raise rates again in November. Wednesday’s CPI numbers did not shake that perception.
Treasury yields retreated from the day’s highs, leaving the two-year note unchanged at 5.00%, while yields on the 10-year note were last up 3 basis points at 4.296%, but down from a session high of 4.352%.
ECB UP NEXT
The dollar index was up 0.1% on the day, losing out to the euro, which rose 0.1%, supported by a shift in expectations for the European Central Bank on Thursday, with bets now favouring a hike, after a Reuters report that the ECB expects inflation will stay above 3% next year in its updated forecasts.
“The leak raises the possibility of a hawkish hike which would be much more supportive for the EUR,” said Steve Englander, global head of G10 FX research at Standard Chartered (OTC:SCBFF), referring to the Reuters report. “Our baseline view is that the ECB will signal a hawkish hold and be deterred by soft growth from further hikes. … We think it is a close call.”
Oil, meanwhile, clung on to the day’s gains after the data. Benchmark Brent futures were up 0.3% at $92.33 a barrel, having traded with a daily gain of 0.5% before the inflation data, while West Texas Intermediate (WTI) crude was up 0.3% at $89.13.
Gold, which tends to move inversely to the dollar, was flat at $1,912 an ounce.
Source: Economy - investing.com
