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U.S. Treasury yields fell slightly on Wednesday and stocks rose as investors ignored higher-than-expected U.S. inflation data.
Yields on interest rate-sensitive two-year US Treasury bonds fell from 5.04 percent to 4.98 percent ahead of the consumer price data. Bond yields fall when prices rise.
The benchmark S&P 500 stock index rose 0.3 percent and the technology-focused Nasdaq Composite gained 0.5 percent after new data showed U.S. consumer prices rose at an annual rate of 3.7 percent in August, up from 3 .2 percent in the previous month, slightly above analysts’ forecasts. Core inflation fell from 4.7 percent to 4.3 percent over the same period.
The dollar gave up earlier gains and was flat against a basket of six peer currencies.
Despite the increase, the overwhelming majority of market participants still expected the Federal Reserve to keep interest rates stable at its policy meeting next week.
“The rise in U.S. inflation in August is unlikely to prompt the Fed to raise interest rates further this month,” said Richard Garland, chief investment strategist at Omnis Investments. “The main impact on the headline inflation rate comes from rising energy prices, but the Fed is likely to ignore this as core inflation remains subdued and inflation expectations have fallen.”
Richard Flynn, managing director of Charles Schwab UK, said: “While it appears that the Fed may be done raising interest rates this cycle, today’s report is likely to reinforce its tendency to keep interest rates high for an extended period of time “to avoid a rise in inflation.” further up.”
A rise in the overall figure was expected as oil prices have risen since June after oil exporters Saudi Arabia and Russia announced supply cuts to support prices.
International benchmark Brent crude rose 0.2 percent to $92.21 a barrel on Wednesday, hitting a new 10-month high earlier in the day. The U.S. equivalent West Texas Intermediate rose 0.1 percent to $88.94.
However, recent price pressure has prompted traders to bet on a further rate hike by the European Central Bank, which is set to announce its monetary policy decision on Thursday. Swap markets now estimate there is a 63 percent chance the central bank will raise euro zone interest rates by 0.25 percentage points to 4 percent this week.
Yields on policy-sensitive two-year German federal bonds, a regional benchmark in Europe, rose 0.04 percentage points to 3.16 percent on Wednesday.
If “the ECB decides to raise interest rates tomorrow, it is more likely that it will signal its willingness to pause afterward, keeping the impact on the final interest rate relatively limited,” said Jason Davis, global rates portfolio manager at JPMorgan Asset Management.
The pan-European Stoxx 600 ended the day down 0.3 percent, extending losses from the previous session, while France’s CAC 40 and Germany’s Dax fell 0.4 percent.
Asian markets fell slightly on Wednesday, with China’s benchmark CSI 300 losing 0.6 percent, while Hong Kong’s Hang Seng and Japan’s Topix lost 0.1 percent each.
Source : www.ft.com