Shares rise, but dollar sags ahead of inflation data
Send a link to a friend
[May 08, 2023] By
Amanda Cooper
LONDON (Reuters) - Global shares edged up in light trading on Monday,
ahead of U.S. inflation data this week that could prove instrumental in
setting expectations for the outlook for monetary policy.
The dollar came under pressure as a deadline for lawmakers to resolve a
standoff over the U.S. government's borrowing limit drew ever closer.
The MSCI All-World index, meanwhile, rose 0.2% on the day.
Friday's robust U.S. payrolls report has prompted investors to dial back
their expectations for the timing and size of the Federal Reserve's
first rate cut. Wednesday's consumer price data is expected to show core
inflation slowed moderately.
"With the Fed having hiked by 25 basis points last week and signalled a
pause, this week’s inflation report is more about how long the Fed will
keep rates at 5.25% before cutting," CityIndex analyst Matt Simpson
said.
"A hot print would presumably be bullish for the U.S. dollar as traders
push potential cuts further into the future."
Money markets show investors expect U.S. rates to have now peaked and
could end this year below 4.40%. Against that backdrop, the dollar is
close to its lowest in a year against a basket of major currencies.
The dollar index was last down 0.3% on the day at 101.05, mainly due to
gains in the euro, which rose 0.3% to $1.10495.
Sterling, which has gained 4.5% against the dollar this year, was up
0.3% at $1.2664, at 10-month highs, ahead of a Bank of England policy
meeting later this week.
"While it is premature to get too 'beared up' on the dollar until a
clearer peak in U.S. rates is seen, the U.S. banking sector travails
that have no easy/costless solutions, continue to make for a mildly
bearish medium-term story," said Alan Ruskin, head of global FX strategy
at Deutsche Bank.
"Certainly it imposes more growth constraints and a greater
stagflationary bias than for major competing economies."
The dollar has fared better on the yen as the Bank of Japan remains the
only central bank in the developed world to not have tightened policy.
The dollar rose 0.1% against the yen to 134.98 yen.
[to top of second column] |
A passerby is reflected on an electric
monitor displaying the graph of recent moments of the Japanese yen
exchange rate against the U.S. dollar outside a brokerage in Tokyo,
Japan May 2, 2023. REUTERS/Issei Kato
HITTING THE CEILING
In Europe, the STOXX 600 index rose 0.4%, although activity was
muted by a public holiday in Britain.
S&P 500 futures rose 0.1%, while Nasdaq futures were roughly flat on
the day, having jumped on Friday following Apple's upbeat results.
Later on Monday, the Federal Reserve's survey of loan officers will
draw an unusual amount of attention as markets seek to gauge the
impact of regional banking stress on lending.
"The survey should point to further broad-based tightening in bank
lending standards," said Bruce Kasman, head of economic research at
JPMorgan.
"Continued stress in the banking system does, of course, increase
concern that a disruptive financial market event is on the horizon,"
he added. "Though our analysis suggests that the impact of a credit
tightening against an otherwise healthy backdrop tends to be
limited."
Bond markets stabilised after having been rattled by Friday's jobs
numbers. Yields on the two-year note were last up 4 bps at 3.9575%,
while those on 10-year debt were up 2 bps at 3.462%.
U.S. Treasury Secretary Janet Yellen on Sunday warned of a possible
crisis should Congress not raise the debt ceiling before the
deadline in early June, which has triggered a broad selloff in
short-dated U.S. government debt in the past month.
Meanwhile, the prospect of a pause in U.S. rate hikes has pushed
gold towards record highs above $2,000 an ounce. Because it bears no
yield itself, higher interest rates undermine investor appetite for
gold. Spot gold was up 0.4% at $2,025 an ounce, having topped $2,072
last week, close to 2020's all-time high.
In other commodity markets, oil rose 2.2% to $76.97 a barrel. Brent
crude futures have lost 10% in value so far this year, as concern
bubbles about the outlook for global energy demand if the economy
tilts towards recession.
(Additional reporting by Wayne Cole; Editing by Shri Navaratnam,
Alison Williams and Christina Fincher)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|