A larger-than-expected rise in US wholesale prices Friday rekindled worries over the timing of interest rate cuts and brought a halt to Wall Street’s recent rebound.
Markets had shuddered after data released on Tuesday showed US consumer price inflation slowed less than expected in January, dealing a blow to hopes of an early interest rate cut by the US Federal Reserve.
But equities quickly rebounded, with data showing a larger-than-expected 0.8-percent decline in US retail sales for January reassuring markets that the economy isn’t running too hot.
But January’s 0.3 monthly gain in US wholesale prices was higher than the 0.1 percent gain expected by analysts, and compares to a 0.1 percent drop in December.
Excluding volatile food and energy prices, the gain was 0.6 percent in January and 2.6 percent over the year.
“Whether the market chooses to dismiss this report as a function of seasonal adjustment factors, the fact of the matter is that the Fed isn’t going to dismiss it, and will see it as a reason to remain patient with respect to cutting rates,” said Briefing.com analyst Patrick O’Hare.
Wall Street stocks opened little changed, with the Dow dipping 0.2 percent but the broader S&P 500 and tech-heavy Nasdaq Composite flat.
Meanwhile, the dollar rose against its major rival currencies, while US bond yields also rose on the prospect the Fed would hold off longer on cutting interest rates.
Europe’s stocks rallied Friday, with Frankfurt and Paris striking more record peaks after solid Asian gains, as investors shrugged off recessions in Britain and Japan.
London equities also jumped as investors drew comfort from a January rebound in UK retail sales, one day after gloomy news that Britain has entered recession.
UK retail sales volumes surged 3.4 percent in January, the fastest increase in almost three years, after sliding 3.3 percent in December, official data showed.
Sentiment was buoyed also by a jump in annual net profit at NatWest, which sent the UK bank’s share price up almost six percent.
In Asia, Tokyo’s Nikkei index ended at a new 34-year high, partly supported by the Wall Street rally on Wednesday and Thursday, including in tech shares.
Japan also entered recession at the back end of 2023, according to data released Thursday, with the Asian nation being overtaken by Germany as the world’s third-biggest economy.
– Key figures around 1430 GMT –
New York – Dow: DOWN 0.2 percent at 38,715.16 points
New York – S&P 500: FLAT at 5,028.36
New York – Nasdaq Composite: FLAT at 15,908.16
London – FTSE 100: UP 1.3 percent at 7,698.95
Paris – CAC 40: UP 0.3 percent at 7,769.30
Frankfurt – DAX: UP 0.4 percent at 17,121.12
EURO STOXX 50: UP 0.4 percent at 4,762.62
Tokyo – Nikkei 225: UP 0.9 percent at 38,487.24 (close)
Hong Kong – Hang Seng Index: UP 2.5 percent at 16,339.96 (close)
Shanghai – Composite: Closed for holiday
Euro/dollar: DOWN at $1.0750 from $1.0772 on Thursday
Dollar/yen: UP at 150.57 yen from 149.93 yen
Pound/dollar: DOWN at $1.2561 from $1.2600
Euro/pound: UP at 85.58 pence from 85.49 pence
Brent North Sea Crude: UP 0.3 percent at $83.10 per barrel
West Texas Intermediate: UP 0.8 percent at $78.66 per barrel
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