The US dollar weakened and government bond yields fell to multi-week lows yesterday after a benign reading of US inflation in June and soft retail demand raised doubts the Federal Reserve would increase interest rates later this year.
Global stock markets scaled fresh record highs, capping their best week in more than two months, and oil prices gained in volatile trading amid signs of strengthening demand.
The US consumer price index increased 1.6 per cent, the smallest gain since October 2016, after rising 1.9 per cent in May, the Labour Department said. Year-on-year CPI has been softening steadily since February, when it hit 2.7 per cent.
The CPI’s drop of 0.1 per cent in May and the lack of a rebound last month could trouble Fed officials who have largely viewed a recent moderation in price pressures as temporary.
The dollar index, which tracks the greenback against six major rivals, was down 0.5 per cent to 95.248 after earlier falling to 95.186, its lowest since September 2016. The drop came after the lacklustre US data raised doubts about US economic growth and whether the Fed will hike rates again this year.
US Treasury yields dropped to multi-week lows as the benign inflation data and unexpected fall in retail sales fuelled doubts about an interest rate increase later this year.
The benchmark 10-year US Treasury note rose 8/32 in price to yield 2.3212 per cent. The 10-year German Bund ticked up almost one basis point to yield 0.525 per cent.
The dollar index fell 0.4 per cent against a basket of currencies, while the euro gained 0.39 per cent to $1.144.
Stock markets, meanwhile, marched higher. MSCI’s gauge of equity performance in 47 countries gained 0.38 per cent, and its pan-European FTSEurofirst 300 index rebounded to rise 0.07 per cent.
The Dow Jones Industrial Average rose 19.57 points, or 0.09 per cent, to 21,572.66. The S&P 500 gained 4.28 points, or 0.17 per cent, to 2,452.11 and the Nasdaq Composite added 12.76 points, or 0.2 per cent, to 6,287.19.
In oil markets, benchmark Brent and United States WTI futures contracts were on track for weekly gains.
Brent crude futures, the international benchmark for oil, were up 31 cents at $48.73 per barrel.
US West Texas Intermediate (WTI) crude futures rose 33 cents to $46.41 per barrel.