NEW YORK () – World stocks rose on Wednesday, U.S. Treasury revenues and the dollar fell, while recent U.S. inflation data showed price pressures are rising, but as expected, the Federal Reserve’s interest rate shows that it does not have to raise rates very aggressively.
Oil prices hit a two-month high, easing concerns about supply tensions and the spread of the Omicron coronavirus variant.
The data showed that the U.S. consumer price index rose 7 percent in the 12-month period from December to December, the largest annual increase since June 1982. But it was within forecasts and reassured investors.
“Today’s inflation report continued to reinforce the theme that the sharp rise in prices is not hampering demand,” said Rick Rider, BlackRock’s chief investment officer for Global Fixed Income and head of the BlackRock Global Allocation Investment Team.
“We don’t think the Fed will overreact to this condition,” Rieder said, adding that he expects the Fed to raise rates in March.
The S&P 500 benchmark index rose 0.28 percent, the Nasdaq Composite rose 0.23 percent and the Dow Jones Industrial Average rose 0.11 percent. Earnings for European and Asian stocks were stronger.
The Pan-European STOXX 600 index rose 0.65 percent. Britain’s FTSE 100 rose 0.81 percent to a one-year high, driven by the mining industry and oil giants. [.L]
Japan’s Nikkei rose 1.9% overnight, while MSCI’s largest non-Japanese Asia-Pacific stock index rose 1.95%.
Global stock markets boosted MSCI’s global stock index by 0.8 percent.
Benchmark 10-year Treasury yields fell to 1.7481% after falling to 1.7269% – more than seven basis points from a nearly two-year high on Monday. [US/]
Fed fund futures are forecasting an almost four rate hike this year, a seismic change from a few months ago. Long-term rates were relatively stable.
U.S. interest rates will peak to 1.5% in the third quarter of 2024, much lower than in previous periods of tightening U.S. rates.
“Even if inflation is slightly lower than expected, it seems realistic that the Fed will raise interest rates quickly,” Commerzbank analysts said in a customer note.
“In the worst-case scenario, the rise will be in May or June, not March.”
The dollar hit a two-year low in its inflation report, while the dollar index fell 0.666 percent to 94.97 against six major currency baskets. The tough dollar lifted the euro by 0.66 percent to a two-month high of $ 1.14430 and spot gold rose 0.2 percent to $ 1,825.40 an ounce.
The prospect of the Bank of England raising rates also boosted the pound. The pound rose 0.52% to $ 1.37045, the highest level in more than two months against the dollar.
In the oil markets, US crude rose 1.92 percent to $ 82.78 a barrel and Brent rose 1.24 percent to $ 84.76. [O/R]
“Omicron is yesterday’s event,” said Luca Paolini, chief strategist at Pictet Asset Management. “The market is moving on revenue, the Fed and economic data, not on Omicron.” (Graph: U.S. CPI is expected to be 7%,)
However, not all major central banks are tightening policy. In China, a softer reading than expected on prices has cost money to soften policy.
Five-year Chinese government bond futures rose eightfold before earnings fell, hitting an 18-month high. Yuan earnings were also limited. [CNY/]
Additional reports by Tom Westbrook in Sydney and Saykat Chatterjee, Dhara Ranasinghe and Sujata Rao in London; Edited by Bernadette Baum and Alex Richardson