MSCI global stock index sets record after U.S. inflationdata
Dollar loses sharply against yen, bond yields fall
In commodities, oil and gold rose
(Updated prices at 2:58 p.m ET/1858 GMT)
A global index of stocks edged down and bond yields fell on Thursday after U.S. inflation data boosted bets on interest rate cuts while the yen surged against the dollar raising questions about whether Japan intervened to boost its currency.
U.S. Treasury yields dropped across the board after
U.S. consumer prices
unexpectedly fell 0.1% in June after being unchanged in May while the annual increase was the smallest in a year, reinforcing views that inflation was abating.
The report followed U.S. Federal Reserve Chair Jerome Powell's testimony to lawmakers on Capitol Hill that "more good data" would build the case for interest rate cuts.
"The CPI print is the big macro driver today. Anyway you look its encouraging news. It's further evidence that basically gets the Fed across the finish line to that level of confidence to initiate rate cuts," said Garrett Melson, portfolio strategist at Natixis in Boston.
And while the strategist does not expect a rate cut this month he expects to see Powell "laying the groundwork for that cut in September, at the July meeting."
But despite the supportive data Wall Street's two biggest indexes fell as investors rotated into lower-weighted interest-rate sensitive sectors such as real estate .SPLRCR and utilities .SPLRCU and out of heavy-weight sectors such as technology .SPLRCT , which has already rallied this year.
Also it did not help that the latest earnings reports provided a less bullish message. Both consumer bellwether PepsiCo PEP.O and Delta Air Lines DAL.N reported disappointing numbers ahead of big U.S. bank results, which will mark the unofficial start of earnings season on Friday.
At 02:58 p.m. the Dow Jones Industrial Average .DJI rose 31.28 points, or 0.08%, to 39,753.30, the S&P 500 .SPX lost 45.21 points, or 0.80%, to 5,588.79 and the Nasdaq Composite .IXIC lost 330.11 points, or 1.77%, to 18,316.94.
MSCI's gauge of stocks across the globe .MIWD00000PUS fell 0.19 points, or 0.02%, to 824.58 after rising about 0.7% to a record high earlier in the day.
Europe's STOXX 600 .STOXX index earlier closed up 0.6%.
In
currencies , the dollar dropped with the Japanese yen at one point gaining more than 2% as traders priced in the likelihood of U.S. rate cuts.
The yen move was so steep that there was some speculation about whether the Japan had moved to shore up the currency, which fell last week to a 38-year low against the greenback.
Japan's TV Asahi, citing an unknown number of government sources, reported that Japanese authorities had intervened. But the country's top currency diplomat
Masato Kanda
said he was not in a position to comment on whether authorities had intervened, according to a Jiji Press report.
The dollar index =USD , which measures the greenback against a basket of currencies including the yen and the euro, fell 0.5% to 104.44, with the euro EUR= up 0.33% at $1.0866.
Against the Japanese yen JPY= , the dollar weakened 1.81% at 158.76.
Sterling GBP= was up 0.52% at $1.2912 after hitting an almost one-year high as comments from
Bank of England
policymakers and better-than-forecast GDP data led traders to reduce bets on an August rate cut in Britain.
In Treasuries, after the inflation data U.S. two-year to 10-year yields slid to their lowest since mid-March, while those on 20-year and 30-year bonds sagged to two-week troughs.
"The data finally is fitting into investors' narrative that the Fed is going to cut rates. We had those two to three months of hot prints, and now we're seeing a decrease. I think this is the first step in the green light," said Lou Basenese, president and chief market strategist, at MDB Capital in New York.
The yield on benchmark U.S. 10-year notes US10YT=RR fell 8.7 basis points to 4.193%, from 4.28% late on Wednesday. The 30-year bond US30YT=RR yield fell 6.6 basis points to 4.4043%.
And the 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations, fell 12.6 basis points to 4.5067%, from 4.633% late on Wednesday.
In commodity trading, oil prices edged higher after the inflation data.
U.S. crude CLc1 settled up 0.6%, or 52 cents at $82.62 a barrel and Brent LCOc1 rose to $85.40 per barrel, up 0.4%, or 32 cents on the day.
Spot gold XAU= , added 1.91% to $2,416.25 an ounce and U.S. gold futures GCc1 gained 1.78% to $2,414.40 an ounce as the precious metal was bolstered by the prospect of rate cuts.
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