Dhaka, Bangladesh
World stocks inch higher as investors await US data

World stocks inch higher as investors await US data

LONDON, Mar 13: World shares inched higher on Tuesday, eking out limited gains as investors kept a wary eye on a U.S. inflation reading later in the day that could offer clues on the pace of Federal Reserve interest rate hikes this year, reports Reuters. The MSCI All-Country World index of stocks, which tracks shares in 47 countries was up less than 0.1 percent. The index has recovered about half its losses during a violent shakeout in stocks in February. The selloff came on the back of strong U.S. wage numbers, which investors feared might feed into inflation and push the U.S. central bank towards a faster pace of monetary tightening. “Today’s CPI inflation data is likely to add further color to the US inflation picture, however it probably won’t add any further clarity to the overall inflation outlook puzzle, given that the Fed doesn’t use CPI as its inflation benchmark,” said Michael Hewson, chief markets analyst at CMC Markets in London. “Nonetheless it is still a useful gauge in establishing when and how the price pressures we’ve been seeing build up in US supply chains start to filter down into the wider economy.” While the consumer price index is a popular barometer of economic health, it is not the primary gauge the Fed uses to determine whether it is meeting its mandate of price stability. Instead, the Fed uses the personal consumption expenditure (PCE) index. US stock index futures were slightly higher on Tuesday ahead of the consumer prices data, which will provide the last crucial reading on inflation in the run up to a near-certain interest rate hike by the Federal Reserve next week. Rising inflation have been a cause of concern for investors as they fear the central bank might raise interest rates at a faster pace. The data is expected to show consumer prices ticked higher to 2.2 percent in February and were unchanged at 1.8 percent on a core basis. Last month, Wall Street saw its worst two weeks in two years as fears of higher wages, inflation and interest rates triggered a selloff that dragged the main indexes into correction territory. But Friday’s wage growth numbers eased some of those concerns, with traders sticking to their bets of three interest-rate increases in 2018. The S&P 500 and the Dow ended lower on Monday as the tariffs signed into law last week by President Donald Trump weighed on industrials, though gains in tech stocks boosted the Nasdaq. Trump on Monday blocked microchip maker Broadcom Ltd’s proposed takeover of Qualcomm Inc on national security grounds. Qualcomm dipped 4.7 percent in premarket trading while Broadcom shares rose 1.2 percent. Shares of rival Intel Corp rose 2.45 percent. General Electric (GE.N) shares fell 1.9 percent after JPMorgan cut its price target on the stock to $11 from $14. European shares opened positive, with the pan-European gaining 0.1 percent. Italian and Spanish stocks rose 0.3 to 0.4 percent, while Britain’s FTSE was a laggard, down 0.1 percent. Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.2 percent after spending much of the day swerving in and out of negative territory. The index surged 1.5 percent on Monday following firm U.S. jobs numbers on Friday, while low wage growth eased concerns about inflation and faster central bank rate hikes. Tokyo stocks rose Tuesday for a fourth consecutive session on a weak yen, while investors remained cautious about the market impact of a cronyism scandal dogging Japan’s premier. The benchmark Nikkei 225 index gained 0.66 percent or 144.07 points to close at 21,968.10 while the broader Topix index was up 0.56 percent or 9.73 points, at 1,751.03. Shares opened lower as a strong yen weighed down on the market. “But sentiment revived as the yen started losing ground,” Hikaru Sato, senior technical analyst at Daiwa Securities, told AFP. The dollar rose to 106.75 yen in afternoon trade, up from 106.34 yen earlier in the day and 106.40 yen in New York Monday afternoon. A weak yen is positive for Japanese exporters as it makes their products more competitive abroad while expanding repatriated profits. On Wall Street Monday, the Dow and S&P 500 both fell on revived fears of a trade war while the tech-heavy Nasdaq pushed to a fresh record high. In Japan, investors were watching a cronyism scandal that has put pressure on the government, although its negative impact is so far limited. Prime Minister Shinzo Abe’s government has faced mounting pressure in recent days over the 2016 sale of state-owned land to one of his supporters at a price well below market value. Finance Minister Taro Aso admitted official documents had been altered but said he did not intend to step down. “The market is concerned as it certainly has a negative impact on the Abe government,” said Makoto Sengoku, market analyst at Tokai Tokyo Research Center. “On the other hand, the there is no decent opposition party which could replace (Abe’s) ruling Liberal Democratic Party,” which means political turmoil is unlikely, Sengoku told AFP. Electronics makers advanced as Sony jumped 1.07 percent to 5,356 yen, with Panasonic up 0.74 percent at 1,692 yen. Nintendo rose 0.78 percent to 48,780 yen and Toyota gained 0.15 percent to 6,969 yen but Honda lost 0.82 percent to 3,708 yen. Banks were mixed as Mitsubishi UJF Financial Group rose 0.75 percent to 737.7 yen with Sumitomo Mitsui down 0.25 percent at 4,616 yen. Another report adds; Euro zone government bond yields edged lower on Tuesday, but deeper falls were kept in check as markets absorbed the first wave of this week’s hefty bond supply and focus turned to U.S. inflation data. Bond markets in the single currency bloc have been well supported since last Thursday’s European Central Bank meeting, with policymakers stressing that interest rates will remain low for some time even as the bank takes tentative steps towards exiting its massive stimulus scheme. Germany’s 10-year bond yield dipped to 0.62 percent , its lowest level in just over a week. Other euro zone bond yields were also a touch lower on the day. “The market looks very well supported at the moment. The U.S. remains the main risk for the market in terms of a negative spill over,” said Commerzbank rates strategist Michael Leister. “For 10-year (German) bond yields to fall below 0.60 percent, we need another strong trigger.” Further falls in borrowing costs were also seen as limited for now as markets prepare to absorb up to 30 billion euros ($37 billion) worth of new supply this week - something that often puts upward pressure on bond yields. In Italy, a debt auction that included a new seven-year bond sale met with decent demand. The bond sales come against a backdrop of uncertainty following an inconclusive March 4 election. The leader of Italy’s far-right League, which emerged as the largest conservative party in the election, said on Tuesday that he did not see the country suddenly leaving the euro. U.S. inflation data due later in the day was also in focus for clues on the pace of Federal Reserve interest rate rises this year. Analysts polled by Reuters forecast the U.S. consumer price index rose 2.2 percent in February year-on-year, compared with a 2.1 percent rise a month earlier. “In bond markets, focus today is solely on the U.S. CPI release, where we see the surprise risk for the core reading as being on the downside,” analysts at UniCredit said in note. Elsewhere, Slovakia’s 10-year bond yield rose as much as five basis points and the cost of insuring exposure to its debt hit the highest in almost three months as the government inched towards collapse. Slovakia’s three ruling coalition parties were holding talks on Tuesday, a government spokeswoman said, after a junior member called for an early election following mass protests against corruption and the murder of a journalist last month.

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