World stocks, bond yields drop after U.S. inflation data

by Jonathan Adams
inflation data

MSCI’s gauge of stocks across the globe dropped 0.76 points, or 0.09%, to 824.01 after adding almost 0.7% to a record high earlier in the day

A global index of stocks edged down and bond yields dropped on Thursday after U.S. inflation data boosted bets on interest-rate cuts while the yen soared against the dollar, raising questions about whether Japan intervened to boost its currency.

U.S. Treasury yields declined across the board after U.S. consumer prices unexpectedly slid 0.1% in June after being unchanged in May, while the annual increase was the smallest in a year, supporting views that inflation was easing.

The report followed U.S. Fed Chair Jerome Powell’s testimony to lawmakers on Capitol Hill that “more good data” would build the case for interest-rate cuts.

The consumer price index figure is the big macro driver today. Any way you look it is encouraging news. It is further evidence that basically gets the Fed across the finish line to that level of confidence to initiate rate cuts, according to Garrett Melson, portfolio strategist at Natixis in Boston.

Despite the supportive data, Wall Street’s two biggest indexes dropped as investors rotated into lower-weighted interest-rate-sensitive sectors like real estate and utilities and out of heavy-weight sectors like technology, which has already rallied this year.

The interest-rate-sensitive small cap Russell 2000 index soared more than 3%.

Since investors now believe that the Federal Reserve is ready to start reducing interest rates, Sam Stovall, chief investment strategist at CFRA Research suggested they are already placing their bets without having to “wait for them to actually do it.”

The DJIA gained 32.39 points, or 0.08%, to 39,753.75. But the S&P 500 declined 49.37 points, or 0.88%, to 5,584.54 and the Nasdaq Composite declined 364.04 points, or 1.95%, to 18,283.41, with both snapping long winning streaks.

MSCI’s gauge of stocks across the globe dropped 0.76 points, or 0.09%, to 824.01 after adding almost 0.7% to a record high earlier in the day.

Europe’s STOXX 600 index earlier ended 0.6% higher.

In currencies, the dollar declined, with the Japanese yen at one point adding more than 2% against the greenback as traders priced in the probability of U.S. rate cuts.

The dollar index, which measures the greenback against other major currencies including the yen and the euro, dropped 0.48% to 104.47. The euro was 0.31% higher at $1.0864.

Against the Japanese yen, the dollar weakened 1.75% at 158.84.

And Sterling firmed 0.51% at $1.291 after reaching an almost one-year high as comments from BoE policymakers and better-than-forecast GDP data led traders to lower bets on an August rate cut in Britain.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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