Wall Street stocks surged on Wednesday and the dollar and Treasury yields fell after new inflation data showed a slowdown in the seemingly relentless rise of US consumer prices.
The Consumer Price Index (CPI) gained just 0.2 percent last month, the Labor Department said on Wednesday, lifted by rises in gasoline prices as well as rents, which offset a decrease in the price of used motor vehicles.
CPI advanced 3.0 percent in the 12 months through June, down from 4.0 percent in May and the smallest year-on-year increase since March 2021.
Wall Street cheered the news, sending stocks up. The Dow Jones Industrial Average rose 0.84 percent to 34,548.67, the S&P 500 gained 1.05 percent to 4,485.96 and the Nasdaq Composite added 1.39 percent to 13,951.80.
US stock gains helped push up MSCI's main 47-country world index, which is now around 14 percent higher for the year, bouncing back from rate hike-induced lows in late 2022.
"The trend that investors have been waiting for is finally here, softer Core CPI prints or hints of pre-COVID normality," Alexandra Wilson-Elizondo, deputy chief investment officer of Multi Asset Solutions at Goldman Sachs Asset Management, said in an email, echoing positive analyst sentiment.
DOLLAR, YIELDS RETREAT
The currency market was moving on the CPI news too. The dollar index was down nearly 1 percent on Wednesday at 100.76, near its lowest point in a year.
The yen had clambered back near 140 to the dollar, up around 1.3 percent, and sterling hit a 15-month high, up 0.4 percent on the day, as the Bank of England said the UK was coping with higher interest rates.
U.S. Treasury yields also dropped, with the 10-year Treasury yield now at 3.885 percent, down 9.7 basis points. The two-year, which typically moves in step with interest rate expectations, was down 17.1 basis points at 4.725 percent.
Wednesday's moves saw euro zone bond yields decline, with Germany's 10-year yield dipping to 2.56 percent, having hit a four-month high of 2.679 percent on Monday.
"The bond market finally got the relief from inflation it was hoping for," Bryce Doty, senior portfolio manager at Sit Investment Associates in Minneapolis, said in an email.
Markets are pricing in a 95 percent chance of a 25-basis-point Fed hike later this month, the CME FedWatch tool showed, but remain doubtful of further hikes after that.
Investor attention will also be on the Bank of Canada, with analysts expecting a second consecutive quarter-point rate hike at its upcoming meeting.
GLOBAL STOCKS, COMMODITIES
Overnight in Asia, Australia's S&P/ASX 200 index rose 0.4 percent, while the bouncing yen knocked Japan's Nikkei down 0.8 percent.
Hong Kong's Hang Seng Index rose 1 percent, while bluechip Chinese shares fell 0.7 percent as tech stocks there jolted 2.5 percent lower amid renewed concerns about Beijing's attitude to the sector.
In the US, second-quarter earnings start to roll in this week, with heavyweight banks JPMorgan, Citigroup and Wells Fargo kicking things off as usual.
Wall Street banks overall are expected to report higher profits as rising interest payments offset a downturn in deal making.
Oil benchmark Brent futures breached $80 a barrel for the first time since May on Wednesday following the US inflation data. US crude rose 1.06 percent to $75.62 per barrel and Brent was at $80.07, up 0.84 percent on the day.
Spot gold added 1.2 percent to $1,954.39 an ounce.
(Edited by : Keshav Singh Chundawat)
First Published: Jul 12, 2023 9:59 PM IST
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