Stocks and dollar swagger ahead of Fed, inflation

[June 12, 2024]  By Stella Qiu and Amanda Cooper

SYDNEY (Reuters) -Global stocks rose on Wednesday, helped by positive sentiment in the technology sector, while the dollar held firm ahead of a key U.S. inflation report and Federal Reserve policy decision that could determine the near-term outlook for interest rates.

European markets rose, recovering some of the losses earlier this week stemming from nervousness over the political landscape in France, where President Emmanuel Macron called a snap vote at the weekend after his party was trounced in European Union elections by the far right.

Overnight on Wall Street, Apple surged 7% to a record high a day after it unveiled new AI features meant to rekindle demand for iPhones. That helped the Nasdaq Composite rise 0.9% and the S&P 500 gain 0.3% to record closing highs.

Focus is now turning to the U.S. consumer price index (CPI)later in the day, which is forecast to rise a slim 0.1% in May from a month earlier, but with the core up 0.3%.

"The countdown is on, with the market going into full risk management mode," said Chris Weston, head of research at Pepperstone.

"I like to use U.S. core CPI m/m as my simple playbook guide, so any number that rounds to 0.2% m/m could offer relief in risk markets and bring out USD sellers, while a number that rounds to 0.4% could see U.S. two-year yields rise and with it the USD comes in hot."

The MSCI All-World index rose 0.14% on the day. In Europe, the STOXX 600 gained 0.6%, rising for the first time in four days.

U.S. stock futures were up 0.1%, indicating a modestly stronger start on Wall Street later.

On the Asian markets, Chinese blue chips ended the day mostly steady, as still-soft price data failing to lift sentiment much. Data showed on Wednesday that China's consumer prices fell 0.1% in May from a month earlier, missing forecasts. On an annual basis, they rose 0.3%.

DOLLAR STANDS TALL

In the currency markets, the dollar index has held on to all of its post-payrolls gains since Friday, standing tall at 105.26 against its major peers.

People walk on an overpass past office towers in the Lujiazui financial district of Shanghai, China October 17, 2022. REUTERS/Aly Song/File Photo

The euro edged up 0.1% to $1.0752, but has fallen for the previous three days, on the back of nerves over the French election might mean for politics and policy.

French stocks and bonds have been battered this week, as political uncertainty has unnerved investors and prompted three ratings agencies to warn the snap election poses a risk to the country's credit standing.

The euro is around its weakest in almost two years against the pound too. Sterling was up 0.14% against the dollar at $1.2757, shrugging off data that showed the UK economy did not grow at all in April, after a strong start to 2024.

"The market had low expectations for the UK economy in April, and it duly delivered," said Nicholas Hyett, investment manager at Wealth Club.

The Fed is not expected to make any change to interest rates at its policy meeting. Instead, the focus will be on whether it keeps three rate cuts in its "dot plot" projections for this year.

Futures imply 39 basis points of Fed easing for this year.

Treasuries, which rallied overnight on the robust result of a 10-year Treasury auction, steadied. The 10-year yield held at 4.402%, after falling 7 bps in the previous session.

Oil prices extended gains for a third straight session. Brent futures rose 0.7% to $82.53 a barrel, while U.S. crude futures gained 0.9% to $78.62 a barrel.

Gold prices edged 0.1% lower to $2,314 per ounce.

(Reporting by Stella Qiu; Editing by Rashmi Aich, Shri Navaratnam and Christina Fincher)

[© 2024 Thomson Reuters. All rights reserved.]
This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.