(Adds oil, gold settlement prices)
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U.S. producer prices rise in November
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Rate hike worries keep Wall Street under wraps
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Crude prices set for 10% weekly loss
NEW YORK/LONDON, Dec 9 (Reuters) – Dollar and Wall Street stocks traded little on Friday after U.S. producer price data sparked mixed reactions, sparking hopes that the Inflation is moderating while raising fears that the Federal Reserve will have to maintain interest. higher rates for longer.
The producer price index (PPI) for final demand rose 0.3% last month and 7.4% in the 12 months to November, while October’s PPI rose revised up to 0.3% from 0.2% as previously reported, the US Department of Labor said.
Economists polled by Reuters had forecast monthly PPI up 0.2% and up 7.2% year-on-year.
As data showed a moderation in the pace of inflation over the past 12 months, the monthly rise fueled concerns that next week’s Consumer Price Index report could point to inflation higher than expected and lead the Fed not to cut rates as soon as many are anticipating .
Fed policymakers are expected to raise rates by 50 basis points next Wednesday, at their last policy meeting of 2022, to a range of 4.25% to 4.50%, which would mark a slower pace of rate hikes. rate.
“Markets are overly optimistic that sometime between June and December (next year) the Fed will be ready to cut,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.
“Today’s data shows that inflation is down, but it is persisting and stickier than most assume,” he said. “The Fed is going to have to raise interest rates a bit more.”
Futures contracts show that the terminal rate will peak at 4.948% next May and then decline to 4.488% by December 2023.
US stocks earlier pared losses after the University of Michigan’s preliminary reading of consumer sentiment showed improvement to 59.1 in December from 56.8 the previous month.
But the enthusiasm for the UMich surveys quickly faded, and Wall Street stocks traded little. The Dow Jones Industrial Average fell 0.25%, while the S&P 500 lost 0.06% and the Nasdaq Composite added 0.11%.
“The Fed has made it clear that it is not about repeating the mistakes of the past,” said Johan Grahn, head of ETFs at Allianz Investment Management in Minneapolis, referring to the premature halt to rate hikes.
“Time just has to run its course before we know we’re on track for the Fed’s goal, a soft landing that’s been talked about,” Grahn said. “It will take time for inflation to come down.”
The MSCI gauge of stocks across the world gained 0.29% and in Europe the broad STOXX 600 index closed up 0.84%. But recession worries dragged the pan-European index to a weekly loss after a seven-week rally.
Treasury yields mostly rose, suggesting higher long-term rates, with the benchmark 10-year yield up 6.9 basis points to 3.562%.
The two-year note, which often moves in line with rate expectations, rose 0.9 basis points to 4.321%.
Market prices also showed a downward trend in inflation breakevens for US Treasury Inflation-Protected Securities (TIPS), considered a good leading indicator of future prices.
The two-year break-even rate fell to 2.3372% from 2.407% Thursday night, suggesting investors expect inflation to average nearly 2.34% over the next two years.
The yield curve measuring the spread between two- and ten-year bond yields, a harbinger of recession, also eased, to -76.1 basis points.
The Dollar was overall weaker overnight, but reversed some of its losses after the PPI report.
The euro fell 0.1% to $1.0545 and the yen strengthened 0.16% to 136.43 to the dollar.
The world’s biggest investment banks expect global economic growth to slow further in 2023 after a year troubled by conflict in Ukraine and soaring inflation, which triggered one of the tightening cycles of monetary policy in recent times.
Investors sold stocks and bought gold in the week to Wednesday, pulling $5.7 billion out of equity funds, BofA Global Research said, a week of “joyless small flows.”
Besides the Fed, the European Central Bank and the Bank of England are also expected to announce interest rate hikes next week as policymakers continue to curb growth to curb inflation.
Eurozone banks are expected to prepay an additional 447.5 billion euros of multi-year ECB loans, bringing the total reduction in outstanding loans to nearly 800 billion euros in a matter of weeks, the Commission said. ECB.
Oil prices rose, but both benchmarks were set for a weekly loss as concerns over weak economic prospects in China, Europe and the United States weighed on demand for oil.
U.S. crude fell 44 cents to settle at $71.02 a barrel.
US gold futures settled up 0.5% at $1,810.70 an ounce.
(Reporting by Herbert Lash; Additional reporting by Carolyn Cohn in London, Stella Qiu in Sydney Editing by Chizu Nomiyama, Mark Potter and Leslie Adler)
