The S&P 500 traded 0.3% lower in New York this afternoon, having moved up to 1.3% higher earlier on Tuesday. Nasdaq Composite heavy for technology fell 0.2%. Oil prices rose more than 6 percent, undermining an initially positive reaction to new US inflation data released Tuesday morning. The decline in price gains for volatile items such as food and energy led the US core consumer price index to rise 0.3 percent on a monthly basis, lower than forecast by 0.5 percent of economists in Reuters poll. However, nominal consumer prices rose 8.5 percent year-on-year in March from 7.9 percent in February, according to the Bureau of Labor Statistics, the fastest annual rise since 1981. Measuring the lower core of inflation initially brought a measure of relief to investors, who feared that an increase in inflation would put pressure on the US Federal Reserve to curb rising prices by rapidly raising interest rates – a prospect that has upset global markets in recent months. However, Jim Paulsen, chief investment strategist at The Leuthold Group, said the “much weaker” than expected headline inflation was unlikely to derail the Fed’s plans to aggressively raise interest rates at its next meeting in May. The Fed raised its key interest rate by a quarter of a percentage point last month, bringing the target range to 0.25% to 0.50%, the first rise since 2018. In government debt markets, the yield on the 10-year US bond, which supports global borrowing costs, fell 0.06 percentage points to 2.72%. The two-year bond yield, which closely monitors interest rate expectations, fell further, indicating that investors re-rated their expectations for interest rate hikes following the announcement of the data. The yield on the 10-year German bond loan, which is an indicator of European borrowing costs, fell 0.03 percentage points to 0.79%. The yield on the government banknote was about minus 0.12 percent at the beginning of the year. German investor confidence, as measured by the Zew’s economic climate index, fell to its lowest point since the first month of the coronavirus pandemic. In other stock markets, the European Stoxx 600 index fell 0.4%, the German Dax fell 0.5% and the French Cac 40 fell 0.3%. The FTSE 100 in London fell 0.5%. Shares of European banks were among the worst performers, with German lenders Deutsche Bank and Commerzbank falling more than 9 percent and 8 percent respectively. Andrew McCaffery, head of global investment at Fidelity International, said he was “extremely cautious” about European stocks and the euro given the “chance” of a recession. In Asia, Hong Kong’s Hang Seng Index closed up 0.5 percent and China’s CSI 300 rose 1.9 percent. Japan’s Topix fell 1.4 percent and South Korea’s Kospi fell 1 percent.
