Equities, dollar gain on rising US inflation

Investors have watched this week as multiple Federal Reserve officials came out to calm inflation jitters ahead of the release of yesterday's report and signal a possible start to talks about tapering stimulus. — Reuters pic
Investors have watched this week as multiple Federal Reserve officials came out to calm inflation jitters ahead of the release of yesterday's report and signal a possible start to talks about tapering stimulus. — Reuters pic

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NEW YORK, May 29 — Global equity markets rose while the US dollar rebounded against major currencies yesterday as new data strengthened concerns about surging inflation and more heated economic activity from pent-up demand.

A US Commerce Department report showed that consumer prices accelerated 3.1 per cent in the year to April, blowing past the Federal Reserve’s 2 per cent target and posting its largest annual gain since 1992.

Consumer spending, which accounts for more than two-thirds of US economic activity, also rose at an 11.3 per cent annualised rate in the first quarter, positioning the economy for strong growth as rising vaccinations eases Covid-19 pandemic’s grip.

The dollar index of major currencies rose 0.043 per cent to 90.053 after making gains in early morning trading. The index is down 1.34 per cent for the month.

The benchmark US 10-year Treasury yield was lower at 1.5807 per cent from 1.61 per cent late on Thursday, compared with 1.6310 per cent at the end of April.

“It’s another indication that we continue to see accelerating inflation remains a concern to many investors, but the markets are showing us that people are comfortable with it,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

MSCI’s broadest index of world stocks rose 0.31 per cent to 711.15. It was up 1.4 per cent for the month. European stocks gained 0.57 per cent to 448.98 and 2.65 per cent in May.

Investors have watched this week as multiple Federal Reserve officials came out to calm inflation jitters ahead of the release of yesterday's report and signal a possible start to talks about tapering stimulus.

On Thursday, the Fed’s vice chair for supervision, Randal Quarles, joined the chorus, saying he was “fully committed” to keeping monetary policy running at full throttle while jobs recover.

All major indexes were making gains on Wall Street in the early afternoon, led by technology, healthcare, real estate, and financial stocks.

The Dow Jones Industrial Average rose 0.19 per cent, to 34,529.45, the S&P 500 gained 0.08 per cent, at 4,204.11 and the Nasdaq Composite added 0.09 per cent, at 13,748.74. For the month, the Dow added 1.94 per cent, the benchmark S&P 500 rose 0.55 per cent, and the Nasdaq shed 1.53 per cent.

Overnight in Asia, Tokyo’s Nikkei leapt more than 2 per cent, ending the month 1.17 per cent higher. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.46 per cent yesterday and 0.3 per cent for the month.

“The market is taking the Fed at its word for the time being, but if the numbers keep coming like this, that narrative will be challenged, as only scaling back asset purchases may not be enough,” said Brian Price, head of investment management at Commonwealth Financial Network in Boston.

Gold reversed rose above the key US$1,900 (RM7,853.65) level yesterday, after data showed rising US consumer prices in April and boosted bullion’s appeal as an inflation hedge.

Spot gold rose 0.38 per cent to US$1,903.3383 per ounce, having earlier dipped as much as 0.8 per cent. It has risen as much as 7.6 per cent during the month.

Oil prices inched higher yesterday, with Brent holding near US$70 a barrel as strong US economic data and expectations of a rebound in global demand outweighed concerns about more supply from Iran once sanctions are lifted.

Brent rose 0.27 per cent, to settle at US$69.65 a barrel, and US West Texas Intermediate crude dropped 0.36 per cent, to settle US$66.61 a barrel. Brent and US crude are up 3.57 per cent and 4.31 per cent respectively in May. — Reiters

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