By Lawrence Delevingne and Naomi Rovnick
(Reuters) -Global shares were mixed and benchmark bond yields were steady on Friday after a U.S. core inflation report signalled price pressures are continuing to abate.
U.S. core personal consumption expenditure, the U.S. Federal Reserve’s favoured inflation measure, declined to 3.7% in September from 3.9% a month earlier, a report Friday said.
“Core inflation continues to lose speed,” Jeffrey Roach, Chief Economist for LPL Financial in Charlotte, said in an email. “This report will not likely change the Fed’s view that inflation will slow in the coming months as demand slows.”
The Dow Jones Industrial Average fell 0.14%, to 32,737, the S&P 500 gained 0.31%, to 4,150 and the Nasdaq Composite added about 1%, to 12,722.
Amazon advanced after beating sales estimates to gain 6.5% in early trading, while Intel Corp shares extended gains, last up about 10%.
MSCI’s all-country equity gauge rose 0.3% following reassuring news on Thursday that the U.S. economy expanded at its fastest rate for almost two years in the third quarter, while the European Central Bank (ECB) also held interest rates steady.
Europe’s Stoxx 600 share index was 0.14% lower and MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.2% higher after hitting a fresh 11-month low on Thursday.
SOFT LANDING?
The yield on the 10-year U.S. Treasury, which moves inversely to the price of the debt security and functions as a benchmark for global borrowing costs, was little changed at 4.849% after scaling 5% earlier in the week.
Still, bond markets held off applauding the news ahead of the Federal Reserve’s interest rate setting meeting next week and as oil prices climbed in response to geopolitical tensions.
Bank of America strategists said that despite unexpectedly strong U.S. economic growth in the third quarter, a slow down to end the year still made “a soft landing more likely than no landing”.
In a note Friday they wrote that globally “markets continue to hope for disinflation to continue smoothly, but don’t take disinflation for granted.”
The Fed is widely expected to keep its funds rate in a range of 5.25%-5.5% next week, although chair Jay Powell has said a strong economy and tight jobs market could warrant more rate rises.
The ECB on Thursday also held its deposit rate at a record high of 4%, although president Christine Lagarde signalled in comments after the decision that further monetary tightening was possible.
Oil prices rose around 1% a barrel as investors priced in fears of an escalation of conflict in the Middle East which could disrupt oil supplies, after reports that the U.S military had struck Iranian targets in Syria.
U.S. crude was last up 0.97% to $84.02 per barrel and Brent was at $88.63, up 0.8% on the day.
CURRENCY MOVES
In currency markets, the euro was steady at 1.058 per dollar, now down almost 14% in the last three months.
Thanks to rate rises and a robust U.S. economy, the index that measures the dollar’s strength against competing currencies has risen almost 5% in three months and was on Friday on track for a weekly gain, even as it ticked down slightly on the day.
The yen hit a new one-year low of 150.77 per dollar overnight and was last at 149.7. That put it not far off the three-decade low of 151.94 it touched in October last year that led Japanese authorities to intervene to prop up the currency.
In recent weeks the Bank of Japan (BoJ) has also intervened heavily in its bond market to suppress yields, pitting itself against market forces as global rates have risen.
The BoJ will face pressure at its meeting next week to shift away from bond-yield control, with any nod to tighter Japanese policy potentially strengthening the yen and encouraging domestic investors to sell overseas assets.
(Reporting by Lawrence Delevingne in Boston, Naomi Rovnick in London and Stella Qiu in SydneyEditing by Jamie Freed, Mark Potter and David Evans)
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