Shares will rise after CPI data reassured investors

FILE IMAGE: People wearing protective masks in the midst of an outbreak of coronavirus disease (COVID-19) are displayed on a spreadsheet showing Japanese stock prices outside brokerage in Tokyo, Japan, on October 5, 2021. REUTERS / Kim Kyung-Hoon

Author: Herbert Lash

NEW YORK (Reuters) – The dollar weakened and global stock market gains rose on Friday after data showed consumer prices were expected to rise in November, easing fears that the Federal Reserve would tighten monetary policy aggressively to fight inflation.

Gold strengthened as rising inflation boosted its safe haven attractiveness, while U.S. government bond yields did little to change as some bond investors don’t see an interest rate hike starting as early as the second quarter of next year, as many equity investors do.

The U.S. consumer price index rose 0.8 percent last month after accelerating 0.9 percent in October, while it accelerated 6.8 percent year on year, the largest annual increase since June 1982.

The Fed’s plans to cut bond purchases, which will likely be announced at a decision-maker meeting next week, are in line with the US Federal Reserve’s view, said Brian Pietrangelo, CEO of Key Private Bank’s investment strategy.

“The Fed has been fairly transparent, which is why you see a positive movement in the stock market today and not much reaction in the bond market,” he said, noting that he expects two or three rate hikes next year.

“We believe the market can handle interest rate increases as long as they are transparent and at the right pace,” he said.

The MSCI World Index for all countries rose 0.10%, reaching its largest weekly rise since early February. However, the broad STOXX Europe 600 index fell 0.30% as Omicron’s COVID-19 variant could weaken the economic recovery in Europe.

On Wall Street, the Dow Jones Industrial Average rose 0.41%, the S&P 500 0.67% and the Nasdaq Composite 0.38%.

IT gains led by Apple Inc., Microsoft Corp and Oracle Corp raised the S&P 500 and Nasdaq higher. But consumer goods rose the most, by 1.8%, suggesting that investors are carefully evaluating the Fed’s next move.

The dollar fell as the foreign exchange market settled on a higher consumer price index, analysts said.

“The foreign exchange market has been extremely long for the U.S. dollar for several months, so as this figure becomes more benign, we are almost out of events that could raise the dollar significantly before the end of the year,” said Greg Anderson, foreign manager. exchange strategy at BMO Capital Markets.

The dollar index fell 0.149% and the euro rose 0.15% to $ 1.1309. The Japanese yen strengthened 0.09% against the dollar to 113.35.

U.S. 10-year bond yields rose 0.2 basis points to 1.489 percent.

The price of oil rose and was the biggest weekly rise since the end of August. Market sentiment was boosted by the impact of the Omicron variant on global economic growth and fuel demand.

Brent crude rose 73 cents to $ 75.15 a barrel. The price of U.S. crude oil fell 73 cents to $ 71.67 a barrel.

U.S. gold futures rose 0.4% to $ 1,784.30 an ounce.

(Report: Herbert Lash; additional reporting: Alun John in Hong Kong and Sujata Rao in London; editors Barbara Lewis, Chris Reese and Dan Grebler)

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