By Chuck Mikolajchak
NEW YORK (Reuters) – A gauge of global stock markets faltered for a second day in a row on Wednesday as the inflation reading did not affect expectations that the US Federal Reserve will remain aggressive in fighting inflation, while the yen jumped as Japan signaled the possibility. Move to support the weak currency.
MSCI’s gauge of stocks worldwide saw its biggest one-day percentage drop in three months on Tuesday after inflation data for August showed consumer prices unexpectedly rose, cementing investor expectations for a rate hike of at least 75 basis points in Federal Reserve policy meeting. Next week and possibly a walk of 100 basis points, according to CME’s FedWatch tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html?redirect=/trading/interest-rates/fed- funds.html.
Wednesday’s inflation data was more moderate, showing producer prices fell for a second straight month in August as gasoline prices fell further, but it wasn’t enough for investors to reconsider the Fed’s aggressive stance.
“The PPI was a pleasant surprise, but the PPI can be very volatile, which is one of the reasons why it is not convincing enough, it was a loud data point simply because that is the nature of the PPI,” said Brian Jacobsen. , senior investment analyst at Allspring Global Investments in Menomoney Falls, Wisconsin.
“The Fed never talks about producer prices, they always talk about consumer prices and how household spending and household income are maintained, which is why investors kind of dismiss it.”
Stocks on Wall Street fluctuated between modest gains and losses in choppy trading before closing higher. Union Pacific (NYSE: 🙂 Stocks fell 3.69% as US Labor Secretary Marty Walsh held talks in Washington with freight rail officials and unions in an effort to avoid rail shutdowns early Friday. The shutdown will exacerbate supply chain problems and possibly lead to higher inflation.
The index rose 30.12 points, or 0.1%, to 31,135.09 points, increased 13.32 points, or 0.34%, to 3,946.01 points, and added 86.10 points, or 0.74%, to 11719.68 points.
European shares closed lower for the second consecutive session on concerns of interest rate hikes as the primary driver. The European index lost 0.86% and the MSCI All Country World Index fell 0.33%. The two-day decline for the MSCI index was the largest in three months.
In currency markets, the yen moved away from 24-year lows against the dollar after the Bank of Japan conducted an interest rate check with banks on Wednesday in an apparent willingness to intervene to tame sharp declines in the yen, although analysts said the strengthening was likely to be short-lived. .
The Japanese yen strengthened 0.95% against the dollar at 143.19 per dollar, while the pound last traded at $1.1536, up 0.39% on the day.
It fell 0.155 percent, with the euro rising 0.07 percent to $0.9977.
Concerns about rising inflation linger and Fed expectations kept upward pressure on US Treasury yields. The two-year US Treasury yield, which is usually in line with interest rate expectations, rose 4 basis points at 3.977% after touching a 15-year high of 3.834%.
The closely watched portion of the US Treasury yield curve that measures the gap between the two-stage yields, which is seen as an indicator of the economic outlook and a reliable indicator of recession on reversal, was at a negative 38.5 basis points.
Oil prices advanced as the International Energy Watch predicts an increase in the switch from gas to oil due to higher prices this winter, although the demand outlook remains weak.
It settled up 1.34% at $88.48 a barrel and settled at $94.10, up 1% on the day.