NEW YORK, Nov 16 ― Stocks rose and the dollar fell yesterday after data provided new signs US inflation was peaking, but markets were rattled by media reports that said Russian missiles killed two people in Poland, news that raised fears of an escalation in the Ukraine war.

Firefighters said two people were killed in an eastern Polish village near the Ukrainian border, Reuters reported. Other media said the deaths were due to what Kyiv said were the heaviest Russian missile strikes since the war in Ukraine began.

The White House said it could not confirm the reports, which Russia's defence ministry denied and described as “a deliberate provocation aimed at escalating the situation.”

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Stocks wavered and the dollar briefly rose on initial reports of the Polish deaths as the market was overstretched as data suggested inflation was coming off its peak, said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

The Polish deaths were reminiscent of US bombs that killed three people in the Chinese Embassy in Belgrade in 1999, he said.

“It did not trigger a war. It was a tragic accident. This is along those same lines,” Chandler said.

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Stocks rallied and bond yields slid further after the Labour Department reported that US producer prices increased just 0.2 per cent in October.

On an annualised basis, PPI rose 8.0 per cent after climbing 8.4 per cent the previous month. Economists polled by Reuters forecast monthly PPI rising 0.4 per cent and advancing 8.3 per cent year-on-year.

The reading was better than expected and bolstered the risk-off mood sparked last week by cooler-than-expected data on US consumer prices that gave investors hope the Federal Reserve can soon curb its aggressive interest rate hikes to tame inflation.

“The market is sniffing out the end of the Fed rate hike cycle,” said Peter Duffy, chief investment officer of credit at Penn Capital Management Co LLC in Philadelphia.

“The market is taking a big sigh of relief because the Fed has had to talk so tough. As soon as these numbers can start coming down, even if it's a slow walk down in inflation, the market will be relieved.”

Fed funds futures slid further from last week's above 5 per cent forecast for the US central bank's target rate. The market is now pricing in a peak of 4.9 per cent next May and June, and then a drop to 4.39 per cent by year's end on expectations the Fed cuts rates.

The likelihood the Fed hikes 50 basis points in December rose to a 93 per cent probability, up from 71.5 per cent last week.

MSCI's gauge of stocks across the globe gained 1.03 per cent, while its emerging markets index rose 2.22 per cent.

On Wall Street, the Dow Jones Industrial Average rose 0.17 per cent after wobbling on the Polish deaths. The S&P 500 gained 0.87 per cent and the Nasdaq Composite added 1.45 per cent.

Big moves in the dollar, among other assets, suggested investors were dramatically changing their positions after the CPI and PPI reports, Chandler said. It will take time to gain a better take on inflation and the Fed's policy plans, Duffy said.

The euro up 0.22 per cent to US$1.0348 (RM4.69), after briefly slipping on the Polish reports, and the yen strengthened 0.50 per cent versus the dollar at 139.18.

The benchmark 10-year Treasury yield fell to a six-week low of 3.758 per cent and was last down 10.1 basis points to 3.766 per cent. The 10-year has fallen 30 basis points since Thursday.

Chinese and Hong Kong stocks rallied overnight as investors digested China's Covid-19 policy adjustments, a property sector rescue package, and a cooling in tensions between the US and China.

Hong Kong's Hang Seng Index surged 4.11 per cent overnight. The index is up nearly 25 per cent for the month while China's CSI 300 has gained 10 per cent in that time.

US President Joe Biden and Chinese President Xi Jinping held a three-hour meeting on Monday in Bali on the sidelines of the G20 gathering. Investors welcomed the two countries' pledge of more frequent communications.

US crude futures settled up US$1.05 at US$86.92 a barrel, while Brent futures rose 72 cents to settle at $93.86.

US gold futures settled little changed at US$1,776.80 an ounce after it bullion prices edged up near three-month highs on safe-haven buying following the media reports from Poland.

Bitcoin rose 1.33 per cent to US$16,809.00, but remained around 20 per cent lower for the month. The collapsed FTX crypto exchange outlined a “severe liquidity crisis” in bankruptcy filings released on Tuesday. ― Reuters