MSCI’s global equities index rose yesterday after a surprise drop in the US inflation reading and a second day of strong earnings reports while oil futures turned lower even as US-Iran hostilities showed no signs of abating.
US producer prices were softer than expected in June in another indication – along with consumer price data released on Tuesday – that inflation was retreating before the recent escalation in the Middle East conflict.
The Labour Department’s Bureau of Labour Statistics said yesterday that the Producer Price Index for final demand dropped 0.3 per cent last month compared with economist forecasts that it would be unchanged.
Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey, suggested that while the latest inflation data was supporting stocks yesterday, investors were ignoring concerns about Iran and the fact that June’s readings don’t reflect recent increases in oil prices. “We’re in a market phase where bad news doesn’t seem to hurt the market and bad news that isn’t quite as bad as we thought it would be really helps the market,” Meckler said.
Yesterday’s earnings reports also helped sentiment after Tuesday’s strong start to the reporting season from some Wall Street banks. Morgan Stanley yesterday reported a second-quarter profit increase from strong mergers and acquisitions activity. BlackRock’s quarterly profit rose, as a stock market rally boosted client asset values. And in healthcare, Johnson & Johnson’s sales and profit beat analyst expectations.
By noon yesterday, the Dow Jones Industrial Average rose 172.89 points, or 0.33pc, to 52,681.16, the S&P 500 rose 12.74 points, or 0.17pc, to 7,556.33 and the Nasdaq Composite rose 86.70 points, or 0.33pc, to 26,193.95.
The MSCI World Price Index rose 5.20 points, or 0.46pc, to 1,126.77 while the pan-European STOXX 600 index rose 0.12pc.
Earlier, South Korea’s tech-heavy KOSPI index closed up more than 6pc, with memory chip maker SK Hynix jumping 8.8pc in Seoul. However, its US-traded shares were down almost 10pc and the Philadelphia semiconductor index sank more than 3pc. Earlier, Japan’s Nikkei gained 1.5pc.
Meanwhile in government bonds, US Treasury yields fell with the benchmark 10-year Treasury note on track for its first consecutive daily declines in nearly three weeks, after economic data showed an easing of price pressures for a second straight day. The yield on benchmark US 10-year notes fell 3.57 basis points to 4.549pc, from 4.585pc late on Tuesday while the 30-year bond yield fell 1.98 basis points to 5.0742pc. The two-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 4.37 basis points to 4.149pc.
In currencies, the dollar slipped against major currencies after the data reinforced signs of easing inflation, supporting hopes that the Federal Reserve can remain patient on interest rates.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.16pc to 100.72, with the euro up 0.14pc at $1.1435. Against the Japanese yen, the dollar weakened 0.07pc to 162.11.
Oil prices were choppy as traders monitored the Middle East hostilities and the prospects for energy shipping in the Strait of Hormuz. US crude fell 0.98pc to $78.56 a barrel and Brent fell to $83.80 per barrel, down 1.1pc on the day. Spot gold fell 0.11pc to $4,048.79 an ounce.
Meanwhile, most stock markets in the Gulf ended lower yesterday after the US said it had launched a new round of strikes on Iranian military sites, intended to reduce Tehran’s capacity to target commercial ships in the Strait of Hormuz.
Saudi Arabia’s benchmark index eased 0.1pc, hit by a 0.8pc fall in oil major Saudi Aramco.
Ongoing geopolitical uncertainty continues to weigh on sentiment, with tensions between the US and Iran and shipping disruptions through the Strait of Hormuz limiting broader market optimism, said George Pavel, general manager at Naga.com Middle East.
Dubai’s main share index rose 0.4pc, with blue-chip developer Emaar Properties gaining 0.4pc. Top Federal Reserve officials welcomed June’s cooler inflation data but said more evidence was needed to confirm that price pressures were easing.
Outside the Gulf, Egypt’s blue-chip index added 0.5pc.
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