By Sinéad Carew and Huw Jones
NEW YORK/LONDON (Reuters) – A global equities gauge was lower on Friday while the dollar fell with Treasury yields as data showing a modest rise in U.S. inflation in April offered investors little clarity on the Federal Reserve’s interest-rate policy.
The U.S. Commerce Department said the personal consumption expenditures (PCE) price index, widely seen as the Fed’s favoured inflation indicator, increased 0.3% last month, in line with expectations and the March increase, while core PCE rose 0.2%, compared with 0.3% in March.
While some strategists said they were relieved inflation wasn’t hotter than expected, Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut said the data didn’t change much in terms of interest-rate expectations.
“The core PCE this morning didn’t really do anything … It was just a status quo type of report so there is no indication that the Federal Reserve is going to be on hold longer, or going to cut rates sooner.”
Separately the Chicago Purchasing Managers Index (PMI), which monitors the health of manufacturing in the Chicago region, fell to 35.4 from 37.9 last month and was well below economist expectations of 41.
MSCI’s gauge of stocks across the globe fell 0.98 points, or 0.13%, to 780.14 at 02:47 p.m. ET. It was tracking its second weekly decline in a row but heading for a monthly gain.
On Wall Street, the Dow Jones Industrial Average was up 271.99 points, or 0.71%, at 38,383.47, the S&P 500 was down 11.62 points, or 0.22%, at 5,223.86 and the Nasdaq Composite fell 190.39 points, or 1.14%, to 16,546.69.
Earlier, Europe’s STOXX 600 index closed up 0.3%. While the index advanced 2.6% for the month it fell 0.5% for the week in its second consecutive weekly decline.
Data showed euro zone inflation rose more-than-expected in May, though analysts said it was unlikely to stop the European Central Bank from lowering borrowing costs next Thursday but may cement the case for a pause in July.
In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.12% to 104.64. It was on track for its first monthly decline in 2024 after the data.
The euro was up 0.11% against the dollar at $1.0844.
But against the Japanese yen, the dollar strengthened 0.27% to 157.22.
In Treasuries, yields fell after the signs of inflation stabilization in April, suggesting to some that the potential for the Fed to cut rates later this year remained intact.
The yield on benchmark U.S. 10-year notes fell 4.4 basis points to 4.51%, from 4.554% late on Thursday while the 30-year bond yield fell 3.5 basis points to 4.6501%.
The two-year note yield, which typically moves in step with interest-rate expectations, fell 3.6 basis points to 4.8914%, from 4.929% late on Thursday.
On the energy front, oil prices fell as traders focused on Sunday’s OPEC+ meeting, which is expected to determine the fate of the producer group’s output cuts.
U.S. crude settled down 1.18% at $76.99 a barrel and Brent settled at $81.62, down 0.29% on the day.
Gold fell 0.81% to $2,324.17 an ounce on the day but was tracking for a fourth straight monthly gain.
(Reporting by Sinéad Carew, Hannah Lang, Huw Jones; Editing by Sharon Singleton, Kirsten Donovan, Susan Fenton and Rod Nickel)
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