Global stock markets and U.S. stock futures experienced a decline on Wednesday, disregarding the data indicating a slight cooling of U.S. inflation in August. The market reaction suggested that the data did not significantly alter the outlook for the Federal Reserve’s monetary policy in the near term.
U.S. stock index futures remained relatively flat after previously posting losses of around 0.2% to 0.3%. Meanwhile, the dollar fell following the release of the Consumer Price Index (CPI), which showed a 3.7% increase in August, slightly surpassing expectations. The core inflation rate, excluding food and energy prices, stood at 4.3% year-on-year, lower than the 4.7% reported in the previous month.
The rise in the general inflation rate was primarily attributed to the higher cost of gasoline, aligned with the increase in oil prices reaching a 10-month high.
MSCI’s world equity index declined by 0.1%, while European shares fell by 0.6%, unaffected by the CPI data. Market expectations have dismissed a rate hike next week and remain uncertain about a potential rate increase in November. The CPI figures released on Wednesday did not alter this perception significantly.
Treasury yields retreated from their day’s highs, with the two-year note remaining unchanged at 5.00%, and the 10-year note seeing a 3 basis point increase to 4.296%, though below the session high of 4.352%.
The dollar rose 0.1% but weakened against the euro, which gained 0.1%. The euro’s gains were supported by a change in expectations for the European Central Bank’s policies on Thursday, as there are now indications of a potential rate hike. This shift in expectation was further propelled by a Reuters report suggesting that the ECB anticipates inflation to remain above 3% next year.
In the commodities market, oil prices held onto their gains after the CPI data release. Crude oil prices rose by 0.3% to $92.33 a barrel, while the price of crude oil (WTI) increased by 0.3% to $89.13.
Gold prices, which typically move inversely to the dollar, remained steady at $1,912 an ounce.
Additional reporting was contributed by Tom Wilson in London and Stella Qiu in Sydney.