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GLOBAL MARKETS- US inflation test looms large, dollar falls

From Reuters - February 14, 2018

LONDON (Reuters) - The dollar slid to a 15-month low against the yen on Wednesday, while world stock markets found firmer ground ahead of U.S. inflation numbers that could soothe, or inflame, fears of faster interest-rate hikes globally.

European stock markets opened the day higher, with blue-chip indexes in London .FTSE, Paris .FCHI and Frankfurt .GDAXIup 0.6-0.9 percent on the day.

U.S. stock futures ESc1 1YMc1 also traded higher, pointing to a positive start for Wall Street shares which climbed on Tuesday for a third straight session.

The VIX stocks volatility index fell to a one-week low at 22.81 .VIX.

But Asian shares were mixed and Japan's benchmark Nikkei closed down 0.4 percent .N225 as the yen rose and with investor sentiment generally strained ahead of the U.S. January inflation report at 1330 GMT.

That data has taken on particular significance following recent strong wage growth data that prompted investors to ratchet up expectations for U.S. rate hikes this year and sparked a rout in world stock markets.

This renewed focus on inflation, not only in the U.S. but more globally has raised concerns that central banks may well be behind the curve when it comes to assessing the outlook for the next few months, said Michael Hewson, chief market analyst at CMC Markets UK.

Headline consumer price inflation is forecast to slow to an annual 1.9 percent and core inflation to 1.7 percent, an outcome that could help calm nerves.

Unease about the looming inflation data was perhaps greatest in currency markets, where the dollar slid to a 15-month low against the Japanese currency at around 106.82 yen JPY=.

The dollar, measured against a basket of currencies .DXY, dipped to a one-week low and was last down 0.1 percent at 85.62.

The dollar index has now given up two-thirds of the gains it notched up this month when investors rushed into the greenback as equity markets suffered a violent sell-off.

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