NEW YORK, March 16 — A gauge of global stocks fell on Friday and was set for a weekly decline that would snap seven straight weekly gains, while the dollar rose and was on track for its strongest week since mid-January, as US inflation data has led to new hopes for interest rate cuts.
Data on Friday showed US import prices increased marginally in February as a surge in the cost of petroleum products was partially offset by modest gains elsewhere, suggesting an improving inflation picture.
Equities struggled this week after readings on US consumer prices and producer prices indicated inflation remains sticky, dampening expectations the US Federal Reserve will cut rates by its June meeting.
Markets are pricing in a 59.2 per cent chance for a rate cut of at least 25 basis points (bps) by the Fed in June, down from 59.5 per cent in the prior session and 73.3 per cent a week ago, according to CME’s FedWatch Tool.
The central bank is widely expected to hold rates steady at its policy meeting next week but investors will be watching the central bank’s economic projections, including its interest rate forecast.
“We seem in a period here where everyone knows rates eventually will be lowered. The expectation of when it happens keeps getting slightly pushed back, but investors still believe it will happen,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
“It’s been a back-and-forth market as people reposition and consider whether some of the real winners have just gone a little bit too far, so you’re seeing them trade off.”
On Wall Street, the Dow Jones Industrial Average fell 190.89 points, or 0.49 per cent, to 38,714.77, the S&P 500 lost 33.53 points, or 0.65 per cent, to 5,116.95 and the Nasdaq Composite lost 155.35 points, or 0.96 per cent, to 15,973.17.
For the week, the S&P 500 lost 0.13 per cent, the Dow shed 0.02 per cent and the Nasdaq declined 0.73 per cent.
In addition, a survey from the University of Michigan showed its preliminary reading on consumer sentiment and inflation expectations were little changed in March while a separate report said production at US factories increased more than expected in February.
The dollar index gained 0.05 per cent at 103.43, recouping some of the prior week’s decline with a gain of 0.71 per cent, with the euro up 0.06 per cent at US$1.0889 on the session. Sterling weakened 0.13 per cent at US$1.273.
Against the Japanese yen, the dollar strengthened 0.49 per cent to 149.05, despite expectations the Bank of Japan is expected to end its negative interest rate policy at its meeting next week.
MSCI’s gauge of stocks across the globe fell 5.07 points, or 0.66 per cent, to 767.58, poised for its third straight daily decline, the longest streak since the start of the year, and down 0.48 per cent on the week.
The STOXX 600 index closed down 0.32 per cent, while Europe’s broad FTSEurofirst 300 index fell 7.42 points, or 0.37 per cent.
The yield on benchmark US 10-year notes US10YT=RR was up 1 basis point at 4.308 per cent after reaching 4.322 per cent, its highest since February 23. The 10-year yield has jumped 22 bps this week, the most since mid-October.
The 2-year note yield, which typically moves in step with interest rate expectations, rose 3.9 basis points to 4.7297 per centand has risen 24.6 bps for the week, its largest jump in two months.
Oil prices dipped, a day after topping US$85 a barrel for the first time since November. The oil benchmarks were on track to close out the week with a gain of more than 3 per cent.
US crude settled down 0.27 per cent lower on the day at US$81.04 a barrel and Brent settled off 0.09 per cent to US$85.34 per barrel. — Reuters
