US stock markets were mixed after the first of two eagerly awaited US inflation reports did not provide conclusive clues about the future direction of US interest rates. The Dow and the broad-based S&P 500 were little changed in midday trading, while the tech-heavy Nasdaq was higher. In Europe, London and Paris edged higher while Frankfurt fell slightly.
US producer prices rose 0.5 percent in April, faster than the analysts’ consensus of 0.3 percent, though the increase was off a lower base after the Labor Department revised the previous month’s figure downward. “It was not a good report on the surface, but it was also not as bad when factoring in downward revisions to the prior month,” said Patrick O’Hare, analyst at Briefing.com.
Traders also brushed off bearish comments from Federal Reserve chair Jerome Powell as they awaited April’s US consumer price index (CPI) on Wednesday, which carries more weight with the Federal Reserve and investors. Consensus is for annual core inflation to ease to 3.6 percent from 3.8 percent. Analysts said a miss in either direction on CPI could have a big impact on markets.
“CPI is likely the keystone of the entire week, and any above-expected climb could cause a market pullback,” said Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research. “They’re separate reports, so I would caution against using this (PPI) to speculate what will happen with CPI tomorrow. But it doesn’t bode well for inflation coming down as fast as expected,” he said.
This week’s economic releases follow forecast-beating US figures for the first three months of the year that have prompted investors to whittle down their expectations for the number of rate cuts — from six in January to at most two now. “The first quarter in the United States was notable for its lack of further progress on inflation,” Powell said Tuesday during an event in the Netherlands. While the stock market did not appear to be betting that US interest will remain higher for longer, the dollar gained against its major rivals.
The European Central Bank and Bank of England are also under the spotlight for when they could start to cut rates, which could widen the interest rate differential with the dollar. UK borrowing costs are expected to be lowered in August but traders have not ruled out a decrease in June, when the ECB is forecast to start trimming interest rates for the eurozone.
Among individual stocks, shares in Anglo American slid 3.8 percent in London after the British mining group announced plans to streamline its business as it fends off a takeover worth $43 billion from rival BHP. Anglo said it would offload coal, diamond, and platinum units to focus on critical minerals. British mobile phone giant Vodafone said its annual profit slumped, but its shares jumped 4.2 percent as chief executive Margherita Della Valle pledged to continue the company’s focus on core activities.
The US market has been marked in recent days by the return of so-called “meme stocks”, or smaller companies whose shares are driven higher by individual day traders. Video game retailer GameStop, AMC Entertainment, and solar energy company SunPower have all seen their shares skyrocket so far this week.
Key figures around 1540 GMT – New York – Dow: Unchanged at 39,431.20 points New York – S&P 500: Increased by 0.1 percent to 5,227.04 New York – Nasdaq Composite: Rose by 0.4 percent to 16,451.20 London – FTSE 100: Climbed by 0.2 percent to 8,428.13 (close) Paris – CAC 40: Advanced by 0.2 percent to 8,225.80 (close) Frankfurt – DAX: Declined by 0.1 percent to 18,716.42 (close) EURO STOXX 50: Unchanged at 5,080.29 (close) Tokyo – Nikkei 225: Gained 0.5 percent to 38,356.06 (close) Hong Kong – Hang Seng Index: Dipped by 0.2 percent to 19,073.71 (close) Shanghai – Composite: Fell by 0.1 percent to 3,145.77 (close) Euro/dollar: Increased to $1.0818 from $1.0792 on Monday Pound/dollar: Rose to $1.2585 from $1.2555 Dollar/yen: Climbed to 156.44 yen from 156.21 yen Euro/pound: Advanced to 86.00 from 85.93 pence West Texas Intermediate: Decreased by 1.3 percent to $78.05 per barrel Brent North Sea Crude: Dropped by 1.2 percent to $82.35 per barrel
