Stocks and gold cheer cooler U.S. inflation, dollar slides
Send a link to a friend
[April 13, 2023] By
Amanda Cooper
LONDON (Reuters) -Global shares rose on Thursday, while the dollar held
near two-month lows after U.S. inflation data suggested the Federal
Reserve may soon be finished raising interest rates, which in turn kept
gold above $2,000 an ounce.
The euro hit a 2-1/2 month high at $1.103. Investors are positive on
Europe, where blue-chip stocks hit a two-decade peak on Wednesday, and
reckon Europe's central bankers will need to be more hawkish longer than
their U.S. counterparts to rein in rising prices.
The broader STOXX 600 index rose 0.3%, buoyed by shares in LVMH hitting
a record high after the luxury retailer reported booming sales in China
in the first quarter of 2023. London's FTSE 100 lagged the rest of the
region after data showed the British economy stagnated in February.
After long weekends in much of the world, this week is fairly
action-packed in terms of economic data. Still to go are U.S. producer
prices at 1230 GMT on Thursday and retail sales on Friday, both of which
could help set expectations for what the Fed might do at its May
meeting.
![](http://archives.lincolndailynews.com/2023/Apr/13/images/ads/current/topflight_sda_SFARM_2023.png)
"If as expected or lower, this may be enough for markets to start to
discount a smaller probability of a Fed rate hike at its May meeting,
but it may also require retail sales to fall as expected tomorrow," ADM
Investor Services chief global economist Marc Ostwald said.
Wholesale prices are expected to have risen by 3% in March, from
February's 4.6% increase, according to the most recent Reuters poll of
economists.
Tuesday's read on U.S. consumer inflation showed prices barely rose in
March. The annual 5% headline rise for U.S. inflation was the smallest
since May 2021 and down from 9.1% last June.
Though with core CPI sticky at an annual 5.6% and minutes from last
month's Fed meeting showing participants cautious about credit
tightening in the wake of banking sector wobbles in March, markets are
nervous.
"The market view is a bit split on whether it'll be a 'hawkish hold' or
a 'dovish hike'," Aninda Mitra, head of Asia macro and investment
strategy at BNY Mellon Investment Management, referring to next month's
Fed meeting.
"Whichever way you look at it, it's probably not going to be a series of
hikes, it's probably going to be one more to hit the peak before you
start to reassess, you either reassess now, or you hike and then
reassess," he said.
The dollar index was down 0.14%, near its lowest in two months, while
U.S. stock futures rose 0.1-0.2%, suggesting a modest rally at the open.
However, given the Fed's concern about banks, much of the week's focus
will fall on earnings from Citi, Wells Fargo and JP Morgan Chase due on
Friday.
![](http://archives.lincolndailynews.com/2023/Apr/13/images/ads/current/prarieland_sda_SFARM_2023.png)
[to top of second column] |
![](../images/041323PIX/busine52.jpg)
The German share price index DAX graph
is pictured at the stock exchange in Frankfurt, Germany, March 10,
2023. REUTERS/Staff
![](http://archives.lincolndailynews.com/2023/Apr/13/images/ads/current/graue_lda_SFARM_2023.png)
"It is an 'if' monetary policy world, that is, wait and see about
banking and financial conditions," said Sam Rines, managing director
at research firm CORBŪ in Texas. "Banking sector issues are
explicitly part of the reaction function now."
Two-year Treasury yields were up 2 basis points at 3.989% after
dropping more than 8 basis points on Wednesday. More tellingly, as
investors place more of a chance on the European Central Bank
raising rates for longer, the gap between 10-year U.S. Treasury
yields and 10-year Bund yields reached its narrowest in two years,
reflecting the steeper rise in German yields.
NO BLOW-UPS, FOR NOW
Goldman Sachs' chief economist Jan Hatzius sounded upbeat, noting
risks of an outright banking crisis have declined sharply since no
further banks have blown up since the weekend of the collapse of
Silicon Valley Bank a month ago.
Still, there is pressure and warning signs, particularly for
regional lenders, with Rines pointing to the Bank of South Carolina
which noted "precipitous increases" in deposit costs and thin
margins in its first-quarter earnings this week.
Elsewhere, gold rose 0.65% to $2,028 an ounce, near its highest for
a year. A weaker dollar and the prospect of a decline in rates means
gold, which does not bear any kind of interest of its own, can
compete more effectively for investor money, especially if inflation
is proving persistent, given its reputation as a hedge against
rising price pressures.
![](http://archives.lincolndailynews.com/2023/Apr/13/images/ads/current/safetytip_sda_peasley_2023.png)
The Aussie dollar rose 0.6% on the back of surprise surges in both
Chinese exports, which rose 14.8% compared with last March, and
domestic Australian jobs.
China's major stock indexes were slightly in the red, with analysts
saying an unexpected rise in March exports was unlikely to be
sustained given softening global demand.
Chinese tech stocks slid after the Financial Times reported SoftBank
was selling down its Alibaba stake, on the heels of Netherlands
investor Prosus flagging some selling of its Tencent stake on
Wednesday. Alibaba shares fell by as much as 5% at one stage, but
later pared losses to close 2% lower. In U.S. premarket trading they
were up about 1.4%.
(Additional reporting by Tom Westbrook and Ankur Banerjee in
Singapore; Editing by Shri Navaratnam, Kim Coghill, Peter Graff and
Raissa Kasolowsky)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |