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Dollar hits 16-month high, stocks rebound after inflation scare

EconomyNov 11, 2021 04:36PM ET
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2/2 © Reuters. FILE PHOTO: TV camera men wait for the opening of market in front of a large screen showing stock prices at the Tokyo Stock Exchange in Tokyo, Japan October 2, 2020. REUTERS/Kim Kyung-Hoon 2/2

By Herbert Lash and Marc Jones

NEW YORK/LONDON (Reuters) - The dollar rose on Thursday, hitting a 16-month high a day after the strongest U.S. inflation reading in more than three decades, while equities rebounded on expectations higher consumer prices will help corporate growth.

The UK's blue-chip stock index rose to 20-month highs as China-exposed miners listed in London bounced on relief that property developer China Evergrande averted a default.

European shares advanced after Goldman Sachs (NYSE:GS) said regional earnings have been resilient to supply chain snags, a message that echoed on Wall Street as investors viewed the impact on rising prices as temporary but positive for corporate profits.

"Inflation in and of itself isn't always a bad thing for the equity market," Don Townswick, director of equity strategies at institutional asset manager Conning. "Typically tightening happens when the economy is doing really well, so merely the prospect of some higher interest rates isn't a problem."

Rising producer prices historically have signaled higher operating margins, which are not reflected in next year's earnings estimates, according to Andrew Slimmon, a managing director at Morgan Stanley (NYSE:MS) Investment Management.

"We think earnings revisions for next year will have to go back up again – a positive for 2022," Slimmon said in a note.

The dollar index, which gauges the currency against six peers including the yen and euro, rose further after posting on Wednesday its biggest daily jump since March following a higher-than-expected rise in U.S. consumer price data. [/FRX]

The CPI index posted its biggest monthly gain in four months to lift the annual increase in inflation to 6.2%, the strongest year-on-year advance since November 1990.

The dollar pushed the euro below $1.15, leaving the next major chart support level down at $1.12. European stocks moved higher, sensing the potential for a competitive boost.

MSCI's all-country world index closed up 0.07% as Wall Street pared gains at the close. The broad STOXX Europe 600 index rose 0.32% to end at a record closing high.

On Wall Street, the Dow Jones Industrial Average slid 0.44%, while the Nasdaq Composite advanced 0.52% and the S&P 500 added 0.06%, almost turning negative at the bell.

(GRAPHIC-U.S. 'real' yields now lower than those in emerging markets: https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrekdkvm/Pasted%20image%201636632142502.png)

Chinese and Japanese stocks also rose. China's markets were supported by property giant Evergrande avoiding default again and hopes Beijing would give the broader sector support. The Nikkei was helped by the weaker yen, which aids exporters. [.T][.SS]

Chinese blue chips rallied 1.6%. Evergrande jumped nearly 7%. Japan's Nikkei ended up 0.6% while the yen weakened as far as 114.15 per dollar from as strong as 112.73 earlier this week.

Tesla (NASDAQ:TSLA) slid 0.4% a day after clawing back heavy losses earlier this week following regulatory filings that showed founder and Chief Executive Elon Musk had sold about $5 billion in the past few days. Tesla is down 13% for the week.

Walt Disney (NYSE:DIS) fell 7.1% to lead declines among Dow components and the S&P 500, as it reported the smallest rise in Disney+ subscriptions since the service's launch and posted downbeat profits at its theme parks. [.N]

Gold prices neared five-month highs they touched the previous session as investors have sought inflation hedges. Gold jumped to a five-month high of $1,868.20 overnight before easing a bit on Thursday.

U.S. gold futures for December delivery settled 0.8% higher at $1,863.90 per ounce.

Oil rose above $83 a barrel before easing a bit as the market grappled with a stronger dollar and concerns about faster U.S. inflation after the Organization of the Petroleum Exporting Countries cut its 2021 oil demand forecast due to high prices.

Brent crude settled up 23 cents at $82.87 a barrel. U.S. crude rose 25 cents to settle at $81.59 a barrel.

Bitcoin hit a fresh record at $69,000 before dipping back to trade about 0.19% higher around $65,046.30.

The U.S. Treasury market was closed in observance of Veterans Day, or Armistice Day elsewhere.

Dollar hits 16-month high, stocks rebound after inflation scare
 

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Comments (14)
Stephen Fa
Stephen Fa Nov 11, 2021 8:12AM ET
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What matters is purchasing power in real terms, not the exchange rate as inflation contagion emerges.
Ronald Warren
Ronald Warren Nov 11, 2021 7:44AM ET
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This has nothing to do with Asian markets. Rather Covid 19. My wife was vaccinated last summer with the J&J vaccine. I refused. Last week she caught Covid and passed it to me. I took my BC powders and got through it. She got a pile of scripts and went yesterday to get the transfusion of antibodies that the state of Florida is offering. Last night she lost her mind and had dementia all night. Resting now, I hope she's normal when she gets up.Last summer, Robert Malone ( inventor of the vaccine) said don't take it. I rest my case. The medicine to treat Covid , in my experience, appears to be much worse than the disease. Food for thought.
George Roshtein
George Roshtein Nov 11, 2021 6:07AM ET
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why would anyone own dollar if they increase supply with one key stroke? they manipulate the prices, just buy bitcoin and keep cool. people will realize dollar is useless scam.
New Jazenevd
New Jazenevd Nov 11, 2021 6:07AM ET
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The dollar is supported by the government and the latter has tools, ensuring that the dollar will stay in, while the same government can outlaw bitcoins or anything similar on short notice.
Stephen Fa
Stephen Fa Nov 11, 2021 6:07AM ET
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You don't understand Bitcoin and decentralized networks.
Ac Tektrader
Ac Tektrader Nov 11, 2021 6:07AM ET
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Bitcoin can be destroyed by government action at anytime. bitcoin is backed by speculation; there is no economic backstop to protect its value, it remains unstable and vulnerable to manipulation ...and according to experts with quantum computing coming on line by 2025 Bitcoin could be easily hacked.
New Jazenevd
New Jazenevd Nov 11, 2021 6:05AM ET
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Blaming supply constraints for high inflation is a glaring example of economic illiteracy. It is well known to any person, familiar with economic theory, that the link works in opposite direction. High inflation causes supply constraints because sellers don’t want to rush with taking orders and making deliveries, waiting for higher prices. Everyone wants to buy and no one wants to sell in the ultimate high inflation environment.
Jurgen Daub
Jurgen Daub Nov 11, 2021 6:05AM ET
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thats the communist theory.
Dale Wyffels
Dale Wyffels Nov 11, 2021 5:54AM ET
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plz look at Fusion Medias disclaimer.. they admit this data is not necessarily accurate. everyone knows what's going on with inflation. it's just an article to calm or divert the real story
Luis Moyano Molina
Luis Moyano Molina Nov 11, 2021 2:34AM ET
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How is possible with Evergrande and other biggf firms having problems it is green ???? Someone can help me ?
Kevin Avila
Kevin Avila Nov 11, 2021 2:12AM ET
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Fears? It’s just data. No rate hike in November. I’m minimumaly 80% sure.
Jason Bacon
Jason Bacon Nov 11, 2021 2:12AM ET
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Actually Asian stocks are flat, if not slightly up. Inflation is not the great unknown in this region.
Mario tragik
Mario tragik Nov 11, 2021 12:23AM ET
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this article did not age well. asia soaring
Mark Stallone
Mark Stallone Nov 11, 2021 12:01AM ET
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RELAX. It's all part of Building Back "Better". Joey and Kam Kam got this.
Kochar Bipin
Kochar Bipin Nov 10, 2021 10:14PM ET
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Chinese indexes are up sharply
Ronald Warren
Ronald Warren Nov 10, 2021 9:52PM ET
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No talk yet about the Evergrande default, but at this moment, they haven't made the 143 million dollar bond payment.
Casino Crypt
CasinoCrypt Nov 10, 2021 9:40PM ET
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Since Monday the German 30 year bond has been swinging wildly like a boat tossing around in a storm. Not normal at all. Looks close to going negative .
Empire Destroyer
Empire Destroyer Nov 10, 2021 9:40PM ET
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and Daxy stays above 16k 🤣
Ai Sexton
Ai Sexton Nov 10, 2021 9:28PM ET
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when u wrote this news. ? at 9:30 pm Eastern time. Nikkei raised .8%. ...
 
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