NEW YORK, March 13 ― A gauge of global stocks was set to snap a two-session fall yesterday, rising along with Treasury yields after data showed US inflation remained sticky in February, indicating the Federal Reserve could keep interest rates higher for longer than is currently expected.
The consumer price index (CPI) rose 0.4 per cent last month amid higher costs for gasoline and shelter, the Labour Department said, matching the estimate of economists polled by Reuters, after climbing 0.3 per cent in January.
In the 12 months through February, the CPI increased by 3.2 per cent, just above the 3.1 per cent estimate, after advancing 3.1 per cent through January.
On Wall Street, the S&P 500 registered another record high, buoyed in part by a surge in Oracle shares. The Dow Jones Industrial Average rose 235.83 points, or 0.61 per cent, to 39,005.49, the S&P 500 gained 57.33 points, or 1.12 per cent, to 5,175.27 and the Nasdaq Composite increased 246.36 points, or 1.54 per cent, to 16,265.64.
US Treasury yields also advanced after the data, with the yield on benchmark US 10-year notes up 4.9 basis points to 4.153 per cent after reaching a session high of 4.172 per cent following a soft auction of US$39 billion (RM182.4 billion) by the Treasury.
“The hotter inflation is an indication that the consumer is doing well, that there's pricing power in this economy that companies are taking advantage of, and the other data tells us that it's not hurting somewhat,” said Rob Haworth, senior investment strategist at US Bank Wealth Management in Seattle.
“However, the bond market has to factor in what is the Fed's reaction function going to be to a somewhat more robust economy. And that's higher for longer and that's where you have to have rates come up kind of across the board.”
The 2-year note yield, which typically moves in step with interest rate expectations, rose 5.9 basis points to 4.5925 per cent.
Market expectations for the timing of the Fed's first rate cut remained largely unchanged, pricing in a 69.8 per cent chance of a cut of at least 25 basis points in June, according to CME's FedWatch Tool, down from 71.7 per cent in the prior session.
MSCI's gauge of stocks across the globe rose 7.08 points, or 0.92 per cent, to 775.85 following two straight declines. In Europe, the STOXX 600 index closed up 1 per cent at a record, while the broad FTSEurofirst 300 index rose 19.77 points, or 0.99 per cent.
The dollar also strengthened after the data. The dollar index gained 0.17 per cent at 102.96, with the euro down 0.06 per cent at US$1.0919.
The Japanese yen weakened further against the greenback and was last off 0.5 per cent against the greenback at 147.67 per dollar.
The yen had earlier softened against the dollar before the US inflation data after Bank of Japan Governor Kazuo Ueda gave a slightly bleaker assessment of the country's economy than he had in January, dampening hopes the central bank might abandon its negative rate policy when it meets this month.
Sterling was down 0.16 per cent at US$1.279 after data showed UK wage growth cooled slightly more than expected last month, putting a bit more pressure on the Bank of England to cut rates sooner rather than later.
In commodities, US crude settled down 0.47 per cent to US$77.56 a barrel and Brent settled down 0.35 per cent to US$81.92 per barrel, as the market weighed the inflation data and a higher-than-expected forecast for US crude oil production. ― Reuters
