Stocks dip, dollar edges higher after US labor market, inflation data
· CNA · JoinNEW YORK :A gauge of global stocks was lower for a third straight session on Thursday, after U.S. economic data indicated the labor market remains solid while progress on tamping down inflation may be waning.
The Labor Department said initial claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 217,000 for the week, slightly below expectations of economists polled by Reuters calling for 223,000 claims, suggesting the weak October government payrolls report was an anomaly.
In the latest reading on inflation, the producer price index (PPI) for final demand rose 0.2 per cent last month, matching expectations, after an upwardly revised 0.1 per cent gain in September.
The data comes after Wednesday's consumer price index (CPI) increased as expected in October amid higher costs for shelter such as rents.
In the 12 months through October, the PPI increased 2.4 per cent after advancing 1.9 per cent in September.
Stocks initially rallied in the wake of the U.S. presidential election but have stalled in recent days.
On Wall Street, U.S. stocks were little changed after the data as investors looked towards comments from Federal Reserve Chair Jerome Powell later in the day.
"When the election occurred, you had this market rally, which was financially based, basically, a Trump administration helps investors," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
"But since then, you've had a flattening of the yield curve, on concern that a lot of the Trump policies are inflationary."
The Dow Jones Industrial Average rose 6.22 points, or 0.01 per cent, to 43,964.41, the S&P 500 fell 1.47 points, or 0.02 per cent, to 5,983.91 and the Nasdaq Composite fell 11.95 points, or 0.06 per cent, to 19,218.77.
Investors have gravitated toward assets expected to benefit from U.S. President-elect Donald Trump's policies in his second term as U.S. president, after he pledged to impose high tariffs on imports from key trading partners, lower taxes and loosen government regulations.
But bond yields and the dollar have also surged recently on concerns that while Trump's policies will spur growth, they also could rekindle inflation after a long battle against price pressures following the COVID-19 pandemic. In addition, tariffs could lead to increased government borrowing, further ballooning the fiscal deficit and cause the Fed to alter its course of monetary policy easing.
MSCI's gauge of stocks across the globe fell 0.47 points, or 0.05 per cent, to 854.38, on track for a third straight daily decline after five consecutive sessions of gains.
European shares rebounded from three-month lows, led by energy and tech stocks after a round of largely positive corporate earnings. The STOXX 600 index rose 0.96 per cent.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,rose 0.04 per cent to 106.50, with the euro up 0.07 per cent at $1.057. The greenback is on pace for its fifth straight session of gains.
Against the Japanese yen, the dollar strengthened 0.33 per cent to 155.97. Sterling was unchanged $1.2703.
Expectations for more Fed rate cuts have been dialed back over the past few weeks, but have become more volatile recently. Expectations for a 25 bps cut at the Fed's December meeting were at 75.7 per cent, down from 82.5 per cent in the prior session but above the 66.6 per cent seen a week ago, according to CME's FedWatch Tool.
The yield on benchmark U.S. 10-year notes fell 2.6 basis points to 4.424 per cent after earlier hitting 4.483 per cent, its highest since July 1.
Federal Reserve governor Adriana Kugler said the central bank has made considerable progress in working to achieve its job and inflation goals, while stopping short of offering firm guidance over what that means for the near-term monetary policy outlook.
Richmond Federal Reserve president Tom Barkin said high union wage settlements and the possibility of coming tariff increases are among the uncertainties that could make U.S. Federal Reserve officials more cautious about thinking they have won their battle against high inflation.
Republicans on Wednesday clinched a majority in the House of Representatives and with it full control of Congress, which would give Trump power to advance his agenda of tax cuts for businesses, workers and retirees.
U.S. crude rose 0.7 per cent to $68.90 a barrel and Brent rose to $72.76 per barrel, up 0.66 per cent on the day.
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