The dollar retreated and global equity markets were mostly flat yesterday even though Wall Street advanced, just ahead of the start of the Federal Reserve policy meeting that is expected to result in the beginning of a rollback of the Fed’s stimulus program.
Wall Street stocks rose, leading a measure of global equity markets to rebound, after data on US consumer prices added to sentiment that Fed chairman Ben Bernanke will lead the US central bank to begin to modestly trim back its bond buying at the end of its two-day meeting today.
“It seems like now the market is believing that tapering will be very well managed by Bernanke, that he knows exactly what the market is expecting and that he’s not going to disappoint,” said Jack De Gan, principal and senior adviser at Harbour Advisory in Portsmouth, New Hampshire.
US consumer prices barely rose in August. However, gains in rents and medical care costs pointed to a stabilisation in underlying inflation.
A 1.8 per cent rise over the past 12 months in so-called core inflation, which strips out the volatile energy and food components, could ease concerns about a disinflationary trend and could allow the Fed to begin to scale back its $85 billion a month in bond purchases.
The Labour Department said its Consumer Price Index edged up 0.1 per cent last month after rising 0.2 per cent in July. Economists had expected consumer prices to rise 0.2 per cent last month.
The euro rallied against the dollar after a better-than-expected reading of a German sentiment survey, while European shares dipped, pressured by weakness in the auto sector following a decline in demand last month.
The euro was last up 0.017 per cent at $1.3356. The dollar was down 0.16 per cent versus a basket of six currencies at 81.165 and was last up 0.16 per cent against the yen, at 99.21 yen.
MSCI’s all-country world equity index rose 0.01 per cent, lifted by gains in US stocks, in particular a 1.4 per cent rise in shares of Apple Inc, to $456.46.
The Dow Jones industrial average was up 43.69 points, or 0.28 per cent, at 15,538.47. The Standard & Poor’s 500 Index was up 5.28 points, or 0.31 per cent, at 1,702.88. The Nasdaq Composite Index was up 18.60 points, or 0.50 per cent, at 3,736.52.
Europe’s FTSEurofirst 300 index of leading European shares fell 0.41 per cent to a provisional close of 1,253.30.
Brent crude fell below $109 a barrel as a deal averting any imminent US attack on Syria calmed fears of a disruption to Middle East oil supplies and after output resumed at a large oilfield in western Libya.
Brent crude for delivery in November fell by $1.75 a barrel to $108.32. US crude for October delivery was down 94 cents at $105.65 a barrel.