Global stocks appeared set to break a seven-week winning streak, with the dollar on course for its best week since mid-January, prompted by recent U.S. inflation data leading to a reassessment of future interest rate paths.
The persistence of inflation, highlighted by U.S. consumer and producer price indices, has tempered the enthusiasm for an imminent rate cut by the U.S. Federal Reserve by June.
The likelihood of a 25 basis point reduction by June has decreased, as reflected by CME’s FedWatch Tool.
Despite expectations for the Fed to maintain current rates in the upcoming policy meeting, the focus remains on its economic projections.
Recent U.S. import price data for February showed a slight increase, driven by higher petroleum costs but balanced by smaller gains in other areas, suggesting a gradual improvement in inflation.
Liz Young of SoFi in New York commented on the inflation situation and the potential consequences of a premature rate cut by the Fed, highlighting the risks of economic overheating and inflation re-acceleration.
The Dow Jones, S&P 500, and Nasdaq all recorded losses, while U.S. factory production in February exceeded expectations.
The University of Michigan’s preliminary report showed stable consumer sentiment and inflation expectations in March.
The dollar strengthened against major currencies, with the dollar index recovering from the previous week’s losses.
The euro and sterling saw slight movements, and the dollar gained against the yen, amidst speculation about the Bank of Japan’s policy direction.
The MSCI global stock index and European stock indexes, including the STOXX 600 and FTSEurofirst 300, experienced declines. U.S. Treasury yields showed mixed movements, with the 10-year note yield slightly increasing.
Oil prices faced a slight downturn after recent gains, attributed to factors such as U.S. inventory declines, drone attacks on Russian refineries, and raised energy demand forecasts, ending the week with a significant overall increase.