Consumer prices in the United States accelerated in June as gasoline and food costs remained high, the data showed, resulting in the largest annual rise in inflation in 40 1/2 years and cementing the case for the Federal Reserve to raise interest rates.
“When you look at the data, a lot of it is energy prices. So if you go back, inflation was starting to slow in other areas, which is what the Fed wants to see.” said Dennis Dick, owner trader of Bright Trading LLC in Las Vegas. “I think (markets) are saying that this June data was the peak of inflation and it’s only going to get better from here.”
Rising prices globally have pushed central banks to raise borrowing costs this year, raising concerns that a reversal of decades-old easy-money policies could lead to a sharp economic downturn.
Fed policy rate futures traders quickly priced in a more than 50% chance of a 100 basis point hike at the next meeting, according to CME Group’s Fedwatch tool, up from a 7.6% chance the day before. Expectations for a 75 basis point rate hike were lowered to 46.5%.
Twitter jumped 8.6% after Hindenburg Research said it had taken a long position on the social media company.
Recession fears have already stumbled across European stocks, but the CPI figure was still higher than most economists had dared to forecast.
The euro only briefly brushed parity with the dollar, but that was enough. The German DAX and the French CAC40 almost they doubled their losses morning, to 1,5% y 1,4%, respectively. The London FTSE did not stay very far, since another 4% rise in the price of gas joined the pressures.
“The CPI of 9.1% is the highest figure in the last 40 years; the only good news is that core inflation is slightly lower“, “And the parity of the euro (…) well, European economic prospects continue to worsenespecially if Russian gas doesn’t start coming back,” Close Brothers Asset Management chief investment officer Robert Alster said.
Concerns that rising interest rates in the United States will cripple the global economy have been felt around the world. The copperwhich is in step with global growth, touched a minimum of 20 months y has plummeted 30% since April.
In this context, the gains that can be received from fixed income at a global level increase. The 10-year US Treasury bond yields -the reference of the costs of loans worldwide- rose again above 3%, from 2.97%while also digesting the latest cut in US growth forecasts from the International Monetary Fund.
Meanwhile, heGerman public debt raises its 10-year yields rose to 1.15%after two days of sharp declines, while the yield on Italian 10-year debt rose to 3.27%.
Automobiles, construction and raw materials were the biggest European sectoral losers, with a decrease of 2,3% y 1.8%, respectively. “With equity valuations already reflecting a 20% earnings compression in Europe, we think there will be a additional 20% drop from here if there is no gas supply,” Gheedia said.
Regarding the Asian stock market, the MSCI index Asia-Pacific stocks outside of Japan gained 0.5%surpassing two consecutive days of losses and having fallen to its lowest level in two years the previous day. Japan’s Nikkei rose 0.5%after losing nearly 2% the day before.
dollar in the world
The dollar in the world retreated from its maximum in 20 years and the euro returned to exceed parity, after a brief drop, after data showed that the inflation of consumer prices in the United States shot up in June to a maximum of more than 40 years.
The dollar index reached 108.59 units, the highest since October 2002, before falling back to 107.95.
The euro is down nearly 12% this year and fell to a 20-year low on Tuesday as the war in Ukraine triggered an energy crisis that hurt euro zone growth prospects.
Oil prices rose slightly, despite rising US oil inventories and inflation figures bolstering the case for another big hike in Federal Reserve interest rates.
Brent crude rose 8 cents to $99.57 a barrel, while US West Texas Intermediate crude gained 46 cents to $96.30 a barrel.
The barrel of Brent, a world benchmark, has fallen a lot since it reached 139 dollars in Marchnear its 2008 all-time high, as investors have been selling oil on fears that aggressive rate hikes to curb inflation will dampen economic growth and demand for oil.
In the cryptoactive market, the Bitcoin rose more than 2% and it looked like he was going to break a three-day losing streak, though u$s19.772 continued to trade below the key psychological mark of u$s20.000.