Global Equities Index Sluggish With Inflation In Focus, Oil Climbs

A global equities index fell slightly yesterday after hitting record highs last week, as investors took a breather ahead of the next batch of US economic data, while oil prices rallied on concerns about shipping disruptions.

US Treasury yields rose after an auction while the dollar fell slightly against a basket of currencies including the euro although it gained ground slightly against the yen.

YEsterday sales of new US single-family homes rose less than expected in January amid a sharp decline in the South region, but demand for new construction remained underpinned by a persistent shortage of previously owned homes. In addition, Dallas Federal Reserve manufacturing data was positive.

“The resiliency of the economy is shining through here. What that means is maybe that rates stay a little higher for longer,” said Matt Stucky, chief portfolio manager for equities at Northwestern Mutual Wealth Management.

Investors are waiting for data on US durable goods orders due out today and the US Federal Reserve’s favoured measure of inflation ― the core personal consumption expenditures (PCE) price index ― is due on Thursday.

“The PCE price inflation index (is) expected to show a little bit more inflation, in line with the numbers that we saw with the CPI and PPI, so the markets are bracing for that,” said Peter Cardillo, chief market economist at Spartan Capital Securities, referring to readings of the consumer price index and the producer price index.

The data will provide the next test for investors, who have had to rethink their bets on central bank rate cuts in recent weeks, surprised by strong US job growth and inflation.

Investors were also watching the risk that US government agencies could be shut down if Congress cannot agree on a borrowing extension by Friday.

Yesterday the Dow Jones Industrial Average fell 62.30 points, or 0.16 per cent, to 39,069.23 while the S&P 500 dropped 19.27 points, or 0.38 per cent, to 5,069.53 and the Nasdaq Composite lost 20.57 points, or 0.13 per cent, to finish at 15,976.25.

The US stock market had risen to record highs last week with help from a bullish financial update from AI pioneer Nvidia.

MSCI’s gauge of stocks across the globe fell 1.97 points, or 0.26 per cent, to 759.21. The STOXX 600 index had closed down 0.37 per cent.

Debt auction

Commodity-linked stocks put pressure on European indexes yesterday after the STOXX 600 hit record highs last week as comments from ECB policymakers had prompted optimism over rate cuts on Friday.

Japan’s blue-chip Nikkei scaled record highs for the second consecutive trading session, supported by upbeat performances in pharmaceuticals, although profit-taking limited momentum. The Nikkei closed up 135.03 points, or 0.35 per cent, to 39,233.71.

But MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.43 per cent lower 0.43 per cent, at 526.50.

US Treasury yields rose yesterday as investors sought a higher premium for taking on a record US$127 billion (RM606.7 billion) in government coupon debt at two auctions that suggested demand was a bit weak ahead of key inflation data later in the week.

The yield on benchmark US 10-year notes rose 1.7 basis points from 4.26 per cent late on Friday while the 30-year bond yield rose 1.4 basis points to 4.3942 per cent from 4.38 per cent. The 2-year note yield, which typically moves in step with interest rate expectations, rose 3.2 basis points to 4.7225 per cent, from 4.69 per cent late on Friday.

In currencies, the dollar index edged down ahead of US durable goods orders and the inflation reading.

The dollar index fell 0.19 per cent to 103.77, with the euro up 0.29 per cent at 1.085.

Against the Japanese yen, the dollar strengthened 0.12 per cent to 150.68 ahead of Japanese inflation data due on Tuesday, forecast to slow to 1.8 per cent. That could add to the case against policy-tightening by the Bank of Japan, the holdout dove among developed market central banks.

In commodities, oil prices gained yesterday as European diesel demand, constrained by Russian sanctions and shipping disruptions, pulled prices higher in a market jittery with US refinery output limited by planned overhauls, analysts said.

US crude settled up 1.43 per cent at US$77.58 a barrel and Brent finished at US$82.53 per barrel, up 1.11 per cent.

Spot gold lost 0.2 per cent to US$2,031.55 an ounce. US gold futures fell 0.68 per cent to US$2,024.80 an ounce. Copper CMCU3 lost 1.38 per cent to US$8,449.00 a tonne. ― Reuters

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