Shares, Dollar Rise Slightly Following US CPI Data | Headlines

Global shares and the dollar rise after US consumer price inflation moderates, boosting hopes of the Fed's rate-hiking cycle nearing its end.

Global shares and the dollar experienced slight gains on Thursday following a moderation in U.S. consumer price inflation in July. This development has raised hopes that the Federal Reserve is nearing the end of its rate-hiking cycle. However, investors remain cautious as they await the arrival of additional data before the next policymakers' meeting. The consumer price index (CPI) increased by 0.2% last month, slightly below expectations, bringing the annualized rate to 3.2% from June's 3%. Economists had predicted a slightly faster rise to 3.3%. The core CPI, which excludes volatile food and energy prices, also slowed to 4.7% in July from the previous month's 4.8%. This report is seen as favorable by the Fed, as it indicates a deceleration in certain areas of inflation, such as travel-related components and car prices. The housing component, which holds significant weight in the index, is also slowing down gradually. Inflation has decreased from its peak of 9.1% in June 2022, leading traders to reduce bets on further rate hikes by the Fed.

Despite these positive developments, investors remain cautious due to the upcoming release of another CPI report and jobs data before the Fed's next meeting in September. Concerns about persistent inflation also persist. The initial reaction in the stock market was positive, with major indexes in Wall Street and Europe experiencing gains of more than 1%. Treasury yields eased, relieving pressure on gold prices, and the dollar traded relatively steady. MSCI's global stock performance index closed up 0.26%, driven by stronger gains in Europe, where the STOXX 600 index rose 0.79%. The Dow Jones Industrial Average rose 0.15%, the S&P 500 gained 0.03%, and the Nasdaq Composite added 0.12%. Analysts suggest that the Fed doves, who advocate for a pause in rate hikes, currently have the upper hand. However, the situation remains uncertain as there are factors that could potentially keep inflation at a sticky level.

The dollar index, which measures the U.S. currency against six peers, initially fell but later rose slightly. The euro also experienced a small increase. Analysts predict that the dollar will remain supported in the near future due to the relative strength of the U.S. economy compared to its peers. Treasury and European bond yields fluctuated, with the U.S. 10-year benchmark rising above the 4.0% floor it has mostly held since August 1. Germany's 10-year yield, the euro zone's benchmark, also rose.

In Asia, stocks remained near a two-week low, still affected by China's deflation and the U.S. ban on investments in sensitive technologies. The MSCI Asia-Pacific index outside Japan fell 0.6%, reaching its lowest level in nearly a month. A technology sub-index also experienced its lowest point in over two months. China's data showed deflation at the consumer-price level and further declines in factory-gate prices in July, raising concerns about the post-pandemic recovery.

Oil prices fell as speculation about another Fed rate hike diminished following the inflation data. OPEC's positive outlook on oil demand also contributed to the decline. U.S. crude futures settled at $82.82 a barrel, while Brent settled at $86.40. Gold prices ticked up slightly after the U.S. inflation data, as investors speculate that the Fed is reaching the end of its rate hike cycle. U.S. gold futures settled at $1,948.90 an ounce.

In conclusion, global shares and the dollar saw modest gains after U.S. consumer price inflation moderated in July. While this development has raised hopes of the Fed nearing the end of its rate-hiking cycle, investors remain cautious as they await further data. The stock market initially reacted positively, with major indexes experiencing gains, while Treasury and European bond yields fluctuated. Asia, however, continued to be affected by China's deflation and the U.S. ban on investments in sensitive technologies. Oil prices fell as speculation about another rate hike diminished, and gold prices ticked up slightly. Overall, the situation remains uncertain, and investors are closely monitoring future data releases and the Fed's next meeting in September.