Global shares pause on inflation view; oil steady on Ukraine
Global shares were little changed on Wednesday, pausing after a six-day slump amid a mixed inflation picture, while floundering peace talks between Russia and Ukraine kept oil hovering near recent highs.
Hawkish moves from the world’s top central banks as the Russian invasion of Ukraine pumped up inflation pressures have weighed on equity markets since the start of the year, with the MSCI World Index (.MIWD00000PUS) down around 10%.
Data on Wednesday showed no let-up for Britain after inflation hit a 30-year high of 7%, although this came a day after a lower-than-expected print in the United States which had given some traders cause to hope policy may be tightened more slowly.
At 0711 GMT, the MSCI World Index was flat at 689.80 points, weighed by falls across most leading European indexes. Britain’s FTSE 100 (.FTSE) was down 0.1%.
“The steepest rises in a generation have unsettled financial markets, as investors digest the unsavoury prospect of tougher hikes in interest rates,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.
Overnight in Asia, much weaker-than-expected import data from China weighed on the outlook, but added to views Beijing could ease policy further, helping MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) climb 0.6%.
Japan also posted weak machinery orders data, although its stocks closed higher on the U.S. inflation data. U.S. stock index futures pointed to a 0.5% gain at the open.
Data published on Tuesday showed U.S. monthly consumer prices increased by the most in 16-1/2 years in March as war in Ukraine boosted the cost of gasoline to record highs, cementing the case for a 50 basis points interest rate hike from the Federal Reserve next month.
However, monthly underlying inflation pressures moderated as goods prices, excluding food and energy, dropped by the most in two years. read more
The data sent U.S. yields lower on Tuesday, snapping seven straight sessions of gains, though they regained a little ground late in the day and in Wednesday trade.
The yield on 10-year Treasury notes was at 2.7270%, compared to an over three-year peak of 2.836%, before the inflation data.
The two year yield was 2.4241%.
The moves in yields “gave a nod to the rhetoric that U.S. inflation has likely peaked or is very close to it,” said Clara Cheong, a strategist at JPMorgan Asset Management.
“While this is unlikely to change the trajectory of the Fed from hiking 50 basis points in May, if inflation continues on this path there will be less pressure on them to be overly aggressive in the second half of the year.”
In European markets, Germany’s 10-year yield recovered some of the prior day’s decline, up nearly 7 basis points.
Oil prices remained held steady around recent highs, with Brent crude futures flat at $104.59 a barrel after Russian President Vladimir Putin said that on-and-off peace negotiations with Ukraine “have again returned to a dead-end situation for us”.
Corn futures were down 0.8% but still close to last month’s 11-year high.
Gold was flat at $1,967 an ounce.
In currency markets, Putin’s remarks were a major driver with the euro up 0.1% against the dollar but just above a five-week low. The dollar index was flat.FRX
The New Zealand dollar had a busy day, rising as high as $0.6901 and falling as low as $0.6808 after the Reserve Bank of New Zealand raised interest rates by a chunky 50 bps — its most aggressive hike in over two decades — but tempered its rate outlook. It was last down 0.8% at 0.67975.
The Bank of Canada meets later on Wednesday and is also expected to deliver a sharp hike.
