By Sinéad Carew and Marc Jones
NEW YORK/LONDON (Reuters) -MSCI’s global stock index was edging higher while Wall Street indexes slipped on Friday and the dollar fell after the U.S. Federal Reserve’s favored inflation reading showed moderating prices in line with expectations for December.
Treasury yields rose after the data suggested that the Fed may be able to engineer a soft landing for the U.S. economy.
The personal consumption expenditures (PCE) price index increased 0.2% last month after an unrevised 0.1% drop in November, the Commerce Department’s Bureau of Economic Analysis said. In the 12 months through December, the PCE price index increased 2.6%, matching November’s unrevised gain.
Still, pending U.S. home sales shot up in December by the most since June 2020, indicating prospective buyers may be getting drawn from the sidelines by stabilizing mortgage rates.
“I think this gives the Fed cover to say what it’s been saying, which is, ‘hey, we have to be data-driven’ and I don’t know that we’re seeing much that would point towards a lower interest rate. They (the Fed) are not going to do anything if the data tells them to stay.” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.
“But I also don’t see anything that’s pointing to a higher interest rate, and that’s good enough for now.”
The MSCI world equity index, which tracks shares in 49 nations, gained 0.14%, hitting its highest level in almost two years.
On Wall Street, at 10:31 a.m. the Dow Jones Industrial Average was up 88.80 points, or 0.23%, to 38,137.93, while the S&P 500 was up 4.11 points, or 0.08%, to 4,898.27 and the Nasdaq Composite was down 8.26 points, or 0.05%, to 15,502.24.
Europe’s equity index rose 1.05% and was heading for a 3% weekly gain, which would be its biggest since the week starting Oct. 30.
This was after the European Central Bank (ECB) signaled on Thursday that it could cut rates by April. While ECB chief Christine Lagarde said it was “premature” to discuss easing, money markets priced an almost 85% chance of a first quarter point rate cut in April. [GVD/EUR]
In currencies, the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was down 0.12% on the day.
The dollar rose 0.31% against the yen to 148.11 but the euro was up 0.1% at $1.0856.
In Treasuries, trading was volatile after the data but most recently the yield on benchmark 10-year Treasury notes was up to 4.1624% from its U.S. close of 4.132% on Thursday. The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 4.3551% compared with a U.S. close of 4.314%.
In commodities, oil prices were heading for a second straight weekly gain. U.S. crude was up for the day so far as positive U.S. economic growth and signs of Chinese stimulus boosted demand sentiment, while Middle East supply concerns added further support.
U.S. crude ticked up 0.12% to $77.46 a barrel. Brent crude rose to $82.62 per barrel.
In Asia, MSCI’s broadest index of Asia-Pacific shares excluding Japan closed down 0.4% but snapped a three-week losing streak for a 1.6% weekly rise.
China’s CSI blue-chip index dipped 0.3% on Friday but scored a near 2% weekly gain after three weeks of losses.
Investors poured almost $12 billion into Chinese equity funds in the week to Wednesday, a BofA Global Research report calculated on Friday. That marks the largest inflow since 2015 and the second largest ever.
(Reporting by Sinéad Carew in New York, Marc Jones in London, Amruta Khandekar in Bengaluru; Editing by Alex Richardson and Mark Potter)
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