GLOBAL MARKETS-Stocks take U.S. inflation spike in stride and rally; dollar on defensive

From Reuters - February 14, 2018

TOKYO (Reuters) - Asian stocks gained on Thursday after Wall Street brushed aside strong U.S. inflation data and surged, in a move that also saw the dollar pinned at two-week lows even as Treasury yields jumped in anticipation of more rapid U.S. interest rate hikes.

MSCIs broadest index of Asia-Pacific shares outside Japan rose 1 percent.

Australian stocks climbed 0.9 percent and South Koreas KOSPI added 1.1 percent. Japans Nikkei advanced 1.3 percent following three successive days of losses that took it to a four-month low the previous day.

Wall Street surged on Wednesday, with the Dow up 1 percent and the S&P 500 climbing 1.34 percent, as investors shrugged off the stronger-than-expected inflation data and snapped up shares of Facebook, and Apple. [.N]

U.S. consumer prices rose more than forecast in January as Americans paid more for gasoline, rental accommodation and healthcare, further raising inflation concerns and the prospect of the Federal Reserve hiking interest rates more than initially expected.

That drove U.S. Treasury yields on most maturities higher on Wednesday, with those on benchmark 10-year notes hitting a four-year high. [US/]

Other data on Wednesday showed U.S. retail sales fell 0.3 percent in January to mark the biggest decline in 11 months. This was well below forecasts for an increase of 0.2 percent, suggesting slower growth could accompany higher inflation.

The combination of stellar U.S. CPI and weak retail sales data leaves investors in a precarious situation, wrote strategists at CitiFX.

Strong price data presents hawkish risks for the Feds dots at the March meeting. Three dots have been the baseline and now fourseems a greater risk. Meanwhile, retail sales results have caused a downgrade ofGDP estimatesacross the Street.

Dot plots represent Fed officials expectations for interest rate hikes.


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