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Global stocks fell on Friday as fresh data on US producer price inflation came in above market expectations, heightening investors’ concerns that the world’s largest economy could keep rates higher for longer.
Wall Street’s benchmark S&P 500 lost 0.1 per cent, while the tech-focused Nasdaq Composite gave up 0.6 per cent in morning trade.
The moves came after fresh data in the US showed that annual producer inflation accelerated to 0.8 per cent in July, from 0.2 per cent in the previous month. The reading was marginally above the 0.7 per cent forecast of economists polled by Reuters.
The dollar gained 0.3 per cent against a basket of six peer currencies following the data release, hitting its highest level in more than a month.
“The increase in wholesale prices serves as a reminder that the data-dependent Fed isn’t ready to declare victory on its campaign to quell inflation,” said Quincy Krosby, chief global strategist for LPL Financial, a US broker-dealer.
A day earlier, the latest US consumer price inflation report showed that prices had risen at an annual rate of 3.2 per cent in July, up from 3 per cent in the previous month.
Despite the uptick in recent data, overall price pressures in the US have eased over the past year following an aggressive central bank tightening campaign, which took interest rates to their highest level in 22 years.
The overwhelming majority of investors expect the Fed to keep its benchmark federal funds rate steady at the next meeting in September, yet the policy decision could be swayed by upcoming economic data releases.
Yields on the policy-sensitive two-year US Treasury rose 0.07 percentage points to 4.9 per cent, while yields on the benchmark 10-year note added 0.06 percentage points to 4.14 per cent. Bond yields rise when prices fall.
The equity sell-off was also evident in Europe, where the region-wide Stoxx Europe 600 fell 1.1 per cent, with consumer goods stocks leading declines. France’s Cac 40 lost 1.3 per cent and Germany’s Dax declined 1 per cent.
London’s FTSE 100 was down 1.2 per cent, after UK growth data came in stronger than expected on Friday, raising concerns that the BoE could keep interest rates higher for longer.
Preliminary data showed that the UK’s economy expanded by 0.4 per cent in the second quarter of the year, overshooting analysts’ expectations of a 0.2 per cent increase.
“The better than expected growth figures will likely give the Bank of England some comfort that raising interest rates to fight inflation hasn’t yet pushed the economy into recession,” said Richard Flax, chief investment officer at Moneyfarm.
Asian markets were also lower as investors continued to digest data earlier in the week that showed that China’s exports had fallen by the most since the beginning of the Covid-19 pandemic, amplifying concerns about the country’s economic growth.
Hong Kong’s Hang Seng index shed 0.9 per cent, ending the week 1.5 per cent lower, while China’s CSI 300 fell 2.3 per cent, leaving it down 1.1 per cent for the week.
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