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Stocks extend gains ahead of US inflation report

Stock markets extended gains on Tuesday and the dollar weakened, ahead of a widely anticipated US inflation report that investors will scrutinize for clues on the future path. future of monetary policy.

Europe’s regional Stoxx 600 was up 0.3% in early trades, up 1.8% in the previous session, while Germany’s Dax also posted small gains. In Asia, China’s CSI 300 index gained 0.4% and Hong Kong’s Hang Seng gained 0.2% as markets in China reopened after the National Day holiday. Japan’s Topix rose 0.3%.

Expected advances for stocks come as investors review US Inflation data will be released at 1:30 pm (BST). Economists polled by Reuters expect the August consumer price index to come in at 8.1 percent year-on-year, down from 8.5 percent in July, with the headline figure. pushed down by weaker energy prices.

But core CPI – which includes volatile commodities like energy and food – is forecast to rise from 5.9% to 6.1% in the world’s largest economy.

Tuesday’s data will be closely watched by traders ahead of the US Federal Reserve’s next monetary policy meeting in late September, with the market pricing in the possibility of a central bank rate hike. rate 0.75 percentage points for the third time in a row. US Federal Reserve The current target range is 2.25 to 2.50%.

Stock markets have fallen this year – with the FTSE index of global shares down 16% – as the Fed and other major central banks raise borrowing costs to contain inflation, raising concerns that Such tightening of the policy could cause an economic downturn.

Kristina Hooper, global market strategist at Invesco, said the US economy was “fundamentally stable” but added that the Fed “is ready to acknowledge that it will take time for the negative effects of tightening so far appears in the economy”.

Hooper added that the Fed “will honor its commitment to data dependence, and there is still a good chance it can only provide a [0.5 percentage point] spiked in September”.

The dollar has weakened in recent days, while the euro has risen after interest rates rose three quarter points by European Central Bank Last Thursday – shows that the policy distinction between the Fed and the ECB is narrowing.

The dollar lost 0.1% against a basket of six other currencies on Tuesday, after sliding 0.7% in the previous session.

Futures that track Wall Street’s broad S&P 500 stock index, which typically rises when the dollar falls due to its weighting on multinationals, added 0.3%.

In the government debt market, the yield on the 10-year US Treasury note lost 0.03 percentage points to 3.33% as its price moved higher. Germany’s equivalent yield added 0.03 percentage points to 1.67 percent, ahead of the release of data from economic research group Zew on investment professionals’ confidence in the country’s economy.

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