The US dollar slid and US government debt yields fell yesterday as a modest rise in consumer prices in April damped expectations that faster inflation could lead the Federal Reserve to boost interest rates more than expected in 2018.
The US Labour Department said its Consumer Price Index rose 0.2 per cent last month, less than forecasts for 0.3 per cent, as a moderation in healthcare prices offset increases in the cost of gasoline and rental accommodations.
The dollar fell against the euro, the Japanese yen and a basket of other major currencies, while the Mexican peso and Brazilian real jumped about 1 per cent on the news. Benchmark 10-year US Treasury notes rose 8/32 in price to push yields down to 2.964 per cent after breaching 3 per cent on Wednesday.
“Inflation is going to rise in year-over-year terms over the summer, but the rise remains moderate rather than sharp,” said Eric Winograd, senior economist at AllianceBernstein LP.
Oil prices were in flux and gave up earlier gains
The soft read on inflation should give the Fed comfort that their gradual approach to raising rates is the correct one and ease market concerns, he said.
“I view today’s number as a slight positive for risk assets in the near term,” Mr Winograd said.
MSCI’s broad gauge of global equity markets rose 0.51 per cent and turned positive for the year as it hit three-weeks highs.
Chinese internet giant Tencent, Apple, Microsoft and Facebook led the index’s advance, while the US technology sector lifted Wall Street.
Emerging market stocks rose 1.26 per cent, while Asia-Pacific shares outside Japan and the Nikkei in Tokyo both earlier closed higher.
The pan-European FTSEurofirst 300 index of leading regional shares fell 0.25 per cent, but shares in London, Germany and France were higher.
On Wall Street, the Dow Jones Industrial Average rose 154.43 points, or 0.63 per cent, to 24,696.97. The S&P 500 gained 15.07 points, or 0.56 per cent, to 2,712.86 and the Nasdaq Composite added 45.80 points, or 0.62 per cent, to 7,385.70.
Oil prices were in flux and gave up earlier gains as investors took profit on a rally triggered by the potential disruption to crude flows from major exporter Iran in the face of US sanctions.
The United States said on Tuesday it plans to impose new sanctions against Iran after abandoning an agreement reached in late 2015 that curbed Tehran’s nuclear activities in exchange for removal of US and European sanctions.
Brent crude futures were down 0.08 per cent at $77.13 a barrel, after hitting $78 earlier in the day, their highest since November 2014.
US West Texas Intermediate crude futures were last up just 0.04 per cent at $71.18.