GLOBAL MARKETS-Stocks decline from record highs as US inflation data looms

Credit: REUTERS/Brendan McDermid

By Chuck Mikolajczak

NEW YORK, March 11 (Reuters) - A gauge of global stocks retreated for a second straight session on Monday, easing further from a record high as investors braced for U.S. inflation data this week which could heavily influence the Federal Reserve's interest rate path.

Stocks have hit multiple record highs this year, and declined on Friday following a mixed U.S. payrolls report that did little to alter expectations for the Fed to begin cutting rates in June.

Attention now turns to U.S. inflation data due on Tuesday in the form of the consumer price index (CPI), with expectations for a monthly increase of 0.4% and 3.1% on an annual basis.

The Dow Jones Industrial Average .DJI fell 180.11 points, or 0.46%, to 38,546.22, the S&P 500 .SPX lost 19.01 points, or 0.35%, to 5,105.57 and the Nasdaq Composite .IXIC lost 27.01 points, or 0.17%, to 16,060.50.

"There are two ways stocks can get hit here - in the very, very near-term you can get an upside surprise to CPI and you get further inversion of the yield curve and that just kind of punts the eventual reckoning down the street a few blocks," said Brian Nick Senior Investment Strategist at The Macro Institute in New York.

"But what we're more concerned about is that there's emerging weakness in a lot of the current activity."

U.S. Treasury yields edged up ahead of the data, with the yield on benchmark U.S. 10-year notes US10YT=RR up 1.4 basis points to 4.102% from 4.088% late on Friday. The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations, rose 5 basis points to 4.536%.

The Fed is scheduled to release its next policy statement on March 20 and investors have all but ruled out a cut, with expectations at 97% the Fed will hold rates steady, according to CME's FedWatch Tool.

Last week, comments from Fed Chair Jerome Powell and European Central Bank policymakers buoyed expectations interest rate cuts will begin this summer. Expectations for a cut of at least 25 basis points (bps) at the June meeting are currently above 70%.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 2.58 points, or 0.33%, to 768.72.

The STOXX 600 .STOXX index closed down 0.35%, while Europe's broad FTSEurofirst 300 index .FTEU3 ended down 6.47 points, or 0.32% lower, weighed down by declines in the technology sector.

The dollar index =USD gained 0.19% at 102.87.

The greenback was slightly weaker against the yen JPY= down 0.05% at 147.025 per dollar. The yen had softened from earlier levels after Reuters reported that a growing number of Bank of Japan policymakers are warming to the idea of ending negative interest rates this month.

In addition, data released on Monday showed Japan was not in recession after economic growth was revised up to an annualized 0.4% for the December quarter.

Crude prices were mixed, as U.S. crude CLc1 settled down 0.1% at $77.93 a barrel and Brent LCOc1 settled at $82.21 per barrel, up 0.16% to on the day as concerns eased that fighting in the Middle East would disrupt supply and Chinese data suggested weak demand, while an increase in U.S. refining limited any selling.

In cryptocurrencies, bitcoin BTC= gained 4.3% to $72,424 after hitting a record $72,739.48.

US CPI inflation expected to have risen in February https://reut.rs/3V2UaBd

(Reporting by Chuck Mikolajczak, Editing by Angus MacSwan and Christina Fincher)

((charles.mikolajczak@tr.com; @ChuckMik;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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