NEW YORK, Feb 28 — A global equities index advanced slightly yesterday as investors weighed the outlook for central bank rate cuts after the latest batch of economic data and ahead of a key US inflation reading due tomorrow, while the dollar fell against the yen.
Oil prices rose after reports that producer group Opec+ was considering extending voluntary oil output cuts into the second quarter to provide additional support.
Earlier in the day, the Conference Board said US consumer confidence retreated in February after three straight monthly increases as households worried about the labour market and the domestic political environment. Its consumer confidence index slipped to 106.7 this month versus economist expectations of 115.0 and a downwardly revised 110.9 for January.
Also, orders for long-lasting US manufactured goods fell by the most in nearly four years in January amid a sharp drop in bookings for commercial aircraft, while the outlook for business investment on equipment was mixed.
The next key data investors are looking to is tomorrow's release of January’s US personal consumption expenditures index (PCE), which is the Federal Reserve’s preferred inflation measure.
“We’ve a bit of a defensive tone in the market today with the utilities sector leading gains,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.
“Investors are looking ahead to Thursday’s inflation reading. If it remains sticky it will impact how soon and how many times the Fed will cut rates,” and because of this “markets are relatively flat because investors are in wait-and-see mode,” he said.
Currently, about 63 per cent of traders expect the Fed to start cutting rates by June, down from nearly 98 per cent at the end of January, according to the CME Group’s FedWatch tool.
Federal Reserve Governor Michelle Bowman signaled that she was in no rush to cut US interest rates, particularly given upside risks to inflation that could stall progress or even cause price pressures to resurge.
In equities, the Dow Jones Industrial Average fell 96.82 points, or 0.25 per cent, to 38,972.41, the S&P 500 gained 8.65 points, or 0.17 per cent, to 5,078.18 and the Nasdaq Composite gained 59.05 points, or 0.37 per cent, to 16,035.30.
Among the S&P’s 11 major sectors, utilities was the biggest percentage gainer, up 1.9 per cent.
MSCI’s gauge of stocks across the globe rose 1.43 points, or 0.19 per cent, to 760.60.
In currencies, the dollar was down slightly against the Japanese yen after data showed Japan’s core consumer inflation exceeded forecasts and the greenback also reacted to January’s bigger than expected decline in US durable goods orders.
The dollar index gained 0.04 per cent at 103.81, with the euro down 0.02 per cent at 1.0845. Against the Japanese yen, the dollar weakened 0.14 per cent at 150.49.
“We’re waiting for the PCE data to give us a stronger sense of direction perhaps,” said Shaun Osborne, chief currency strategist at Scotiabank in Toronto.
And because investors are already expecting strong numbers, it would probably “have to be a big upside surprise to really get the dollar strengthening,” Osborne added.
In US Treasuries, yields rose moderately in choppy trading, as investors waited for tomorrow's inflation data.
In energy markets, oil prices were also supported by notes of caution from Israel, Hamas and Qatari mediators about progress towards a truce in Gaza, after US President Joe Biden said he believed a ceasefire could be reached in under a week to halt the war for Ramadan.
US crude settled up 1.66 per cent at US$78.87 a barrel while Brent finished up 1.36 per cent at US$83.65 per barrel.
Gold prices held steady with the US inflation reading and comments from Fed officials on investors’ radar this week.
Spot gold lost 0.04 per cent to US$2,029.82 an ounce. US gold futures gained 0.36 per cent to US$2,035.90 an ounce.
In cryptocurrencies, bitcoin rose 3.90 per cent to US$56,795.00. — Reuters
