Written by Chuck Mikolajczak
NEW YORK (Reuters) – A gauge of global stocks fell for a third straight session on Thursday while the dollar rose, after U.S. labor market data and comments from Federal Reserve Chairman Jerome Powell suggested the path to a gradual rate cut by the central bank.
The Labor Department said initial claims for federal jobless benefits fell 4,000 to 217,000 seasonally adjusted for the week, slightly below expectations of 223,000 among economists polled by Reuters, suggesting the weak October payrolls report was a fluke.
In the latest inflation reading, the producer price index for final demand rose 0.2% last month, in line with expectations, after a revised 0.1% higher gain in September.
The data comes after Wednesday’s consumer price index rose as expected in October amid higher housing costs such as rent.
In the 12 months to October, PPI increased by 2.4% after improving by 1.9% in September.
Powell said that continued economic growth, a strong labor market, and inflation that remains above the 2% target mean that the US central bank does not need to rush to cut interest rates and can act more cautiously.
“There was some concern after the election that Trump’s aggressive tax policies would cause inflation and that prices would go up a little bit, but usually everyone calms down a little after a few days and the market goes back to its knitting, so I’m waiting to see. some volatility here,” said Scott Welch, chief investment officer at Certuity in Potomac, Maryland.
“The pressure on rates going forward from here is high, they are not going down, we may see the rates go down a little but if you look at the economic situation, if you look at the plans that are intended to be laws and management policies, they are going well. jump between 4% and 5%.
Stocks started rallying after the US presidential election. Every major Wall Street index closed at records on Monday, but has been flat in recent days as bond yields have risen to a four-month high.
U.S. stocks fell after the data and edged lower after Powell’s comments.
It fell 175.86 points, or 0.40 percent, to 43,782.33, fell 29.15 points, or 0.49 percent, to 5,956.23 and fell 105.02 points, or 0.55 percent, to 19,125.71 .
Investors flocked to assets expected to benefit from US President-elect Donald Trump’s second-term policies after he promised to impose higher tariffs on imports from major trading partners, lower tariffs and loosen government regulations.
But bond yields and the dollar have also risen recently on concerns that while Trump’s policies will boost growth, they could reignite inflation after a long battle against price pressures following the COVID-19 pandemic. Additionally, inflation could lead to increased government borrowing, further ballooning the fiscal deficit and cause the Fed to reverse its course of easing monetary policy.
MSCI’s global stock average fell 3.49 points, or 0.41%, to 851.36 and was on track for its third straight daily decline after five consecutive periods of gains.
European shares rebounded from three-month lows, led by energy and technology shares after a round of positive corporate earnings. The index closed up 1.08%.
The , which measures the greenback against a basket of currencies, rose 0.34% to 106.82, while the euro was down 0.29% at $1.0532. The greenback is on its fifth consecutive streak of gains.
Against the Japanese yen, the dollar strengthened 0.47% to 156.18. Sterling weakened 0.27% to $1.2669.
Expectations for further rate cuts by the Fed have been reversed over the past few weeks, but have changed significantly recently. Expectations for a 25-point rate cut at the Fed’s December meeting were at 72.2%, down from 82.5% in the previous session but up from 66.6% last week, according to CME’s FedWatch Tool.
The yield on the benchmark US 10-year note fell 1.4 basis points to 4.437%, paring losses after Powell’s comments.
Fed Governor Adriana Kugler said the central bank has made significant progress toward its goals for jobs and inflation, while stopping short of giving firm guidance on what that means for the near-term outlook for monetary policy.
Richmond Federal Reserve President Tom Barkin said higher union wages and possible tax increases are among the uncertainties that could make Fed officials more cautious about thinking they have won their fight against inflation.
It rose 0.39% to $68.70 a barrel and rose to settle at $72.56 per barrel, up 0.39% on the day, partly as the dollar’s strength and rising US crude supplies added to oversupply concerns.
