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Stocks stumble as caution reigns ahead of U.S. inflation data

Economy Aug 09, 2022 06:56AM ET
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2/2 © Reuters. FILE PHOTO: An investor looks at an electronic board showing stock information at a brokerage house in Beijing, China, August 25, 2015. China's major stock indexes sank more than 6 percent in early trade on Tuesday, after a catastrophic Monday that saw C 2/2
 
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By Tom Wilson

LONDON (Reuters) - Shares slipped and the dollar hung off recent highs on Tuesday as investors eyed U.S. inflation data due a day later that will likely yield clues to any further aggressive Federal Reserve rate hikes.

The stakes are high for the July U.S. consumer prices report on Wednesday after an unexpectedly strong U.S. jobs data last week boosted expectations of a sharp interest rate increase to tackle soaring inflation.

The broader Euro STOXX 600 fell 0.6%, after logging its best session in nearly two weeks on Monday, with German stocks down 0.7%. Miners and autos, among top gainers a day earlier, led declines on Tuesday.

Wall Street futures pointed to slim gains.

"The focus is on tomorrow's U.S. inflation numbers and whether or not they are likely to show any indication of a softening of inflationary pressures," said Michael Hewson, chief market analyst at CMC Markets.

"Are we near the peak, and will tomorrow's CPI numbers reflect that?"

On Monday, Wall Street closed mostly flat after blockbuster jobs data last week reinforced expectations the Federal Reserve will crack down on inflation, while a revenue warning from chipmaker Nvidia (NASDAQ:NVDA) reminded investors of a slowing U.S. economy.

Investors are now awaiting the consumer price data to gauge whether the Fed might ease slightly in its inflation fight and provide a better footing for the economy to grow.

The dollar also held just below its recent top, with traders wary of a surprise that could heap more upward pressure on interest rates. Against a basket of currencies, the dollar was down a fraction at 106.14.

The MSCI world equity index, which tracks shares in 47 countries, fell 0.1%.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan was flat, after giving up modest gains. Japan's Nikkei slid 0.95%, hit by weak quarterly earnings by corporate heavyweights and lowered expectations for the video game market.

Caution abounded in bond markets, too, with euro zone bond yields steady. Germany's 10-year yield, the benchmark for the bloc, was unchanged at 0.90%.

INFLATION EXPECTATIONS

There were some encouraging signs for the Fed on the prices front, with a New York Fed survey on Monday showing consumers' inflation expectations fell sharply in July.

"That'll be music to the Fed’s ears, since if that trend continues then it means that the Fed may not have to be so aggressive in hiking rates," Deutsche Bank (ETR:DBKGn) analysts wrote.

"One of their big fears is that higher inflation expectations will lead to a self-fulfilling prophecy of higher actual inflation."

Soaring prices across the globe are likely to be top of the agenda at the Jackson Hole central banking symposium later this month.

The Bank of England (BoE) will probably have to raise interest rates further from their current 14-year high to tackle inflation pressures that are gaining a foothold in Britain's economy, BoE Deputy Governor Dave Ramsden said.

Sterling was up 0.4% versus the dollar at $1.2128. It is down more than 10% this year versus the greenback.

Brent crude reversed earlier losses to rise $1 a barrel to $97.41 after reports Russia had suspended oil exports via the southern leg of the Druzhba pipeline.

Oil prices had earlier continued their recent retreat after suffering their biggest weekly drop since April 2020 on worries about stalling global demand as central banks tighten policy. [O/R]

Stocks stumble as caution reigns ahead of U.S. inflation data
 

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Comments (4)
Tre Hsi
Tre Hsi Aug 09, 2022 9:47AM ET
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"stock tumble" seems to be a bit over ***** as of 20 mins after opening the S&P 500 is down 0.1% and NASDAQ is down 0.7%.....
David Beckham
David Beckham Aug 09, 2022 9:19AM ET
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Not sure is there people really think inflation slow down quick?
David Beckham
David Beckham Aug 09, 2022 9:18AM ET
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It’s doesn’t matter if they want to pump then they go up now they make it look like scary and important then squeeze bears
Brad Albright
Brad Albright Aug 09, 2022 9:18AM ET
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Who is they? The monsters under your bed?
Kris Jay
Kris Jay Aug 09, 2022 6:33AM ET
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so if the number comes in at a "low" like 8% or 7.9%, will that be reason for the market to shoot up?? Hey, its 0.7% less inflationn than last time! yipee!   I sense that is what this market will do but Powell will be hammering down again in September. To me there is no inflation number other than 2% coming out Wed which doesnt deserve another 75bps hike.  We will not get a 2% inflation number however.
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Tre Hsi
Tre Hsi Aug 09, 2022 6:33AM ET
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Brian Chong  "who do you think causes recession/depression for the past decade?"  -- what recession?  there was no recession from 2011-2021....unless you are talking about the 2008 financial crisis, while the Fed deserve plenty of the blame,  it's not exactly fair to pin the whole thing on the Fed is it?
Kris Jay
Kris Jay Aug 09, 2022 6:33AM ET
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Jeff Gordon  there is no way to get inflation below 2% without increasing rates.  just look at the job numbers.
Kris Jay
Kris Jay Aug 09, 2022 6:33AM ET
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William Smith  fed has no responsibility or measurement of success by stock market value.  their entire purpose and mission is to get inflation below 2%.
Kris Jay
Kris Jay Aug 09, 2022 6:33AM ET
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Jeff Gordon  i think you are in the group that feels if the CPI comes in a 1/2 % lower then Fed will start easing in September and they have been clear that is not the case.  Fed will not be easing (i.e. reducing rates any time soon, perhaps this time next year).   3.5-4.5% Fed funds rate are "normal rates" we have in our economy for years.  having 2.5% fed funds rate will not bring down inflation.  Powell calls it "neutral" but he is off by at least 1%.
Brad Albright
Brad Albright Aug 09, 2022 6:33AM ET
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Jeff Gordon They will stop rate cuts? The fed is not cutting rates.
 
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