Dollar gains, stocks slide on muddled inflation outlook

• MSCI World index slips despite strong US retail sales
• US T-Bill Yields Deviate from Lows; Gold below
• Oil heads for biggest weekly decline since at least May

NEW YORK / LONDON, July 16 (Reuters) – The dollar rose on Friday after bullish US retail data confirmed the economy accelerated in the second quarter, but global equity markets fell as investors rose with inflation expectations are struggling and interest rates could start to rise.

Oil markets were on track for their biggest weekly decline since at least May as traders bet that supply from OPEC producers could increase to meet the expected surge in demand as economies recover from the coronavirus pandemic. Continue reading

How quickly this will happen is far from certain, however, as coronavirus infection rates are rising again in a number of countries, particularly Africa and parts of Asia, as the delta variant continues to prevail. Continue reading

The MSCI All-Country World Index (.MIWD00000PUS), a broad measure of global stocks, lost 0.36% as European markets gave up some of their previous gains to decline. The pan FTSEurofirst 300 Index (.FTEU3) fell 0.77 percent to 1,747.79.

Wall Street stocks initially rose after the Commerce Department said retail sales rebounded 0.6% in June as demand for goods remained strong despite spending shifting towards services. Continue reading

Profits are up a tidy amount from two years ago, and inflation is likely to be around 2.6% once last year’s low base effect is removed, said Jason Pride, chief investment office for Private Wealth at Glenmede in Philadelphia.

“That should ultimately be acceptable to the (stock) market and allow for a sustained uptrend,” said Pride. “My only hesitation is that stock market valuations are high.”

While companies with just 11% of the S&P 500’s market capitalization reported second quarter results, earnings exceeded estimates by 22.1% overall, Jonathan Golub, chief strategist for US equities at Credit Suisse, said in a press release.

Business-sensitive industrials, energy, consumer discretionary, finance and materials are expected to more than double while so-called big tech and non-cyclicals are expected to grow 36% and 10% respectively, Golub said.

The Dow Jones Industrial Average (.DJI) was down 0.29%, the S&P 500 (.SPX) was down 0.15%, and the Nasdaq Composite (.IXIC) was trading near breakeven, down 0.05%.

Gold prices fell as a stronger dollar and slightly higher yields dampened the attractiveness of precious metals, while bond yields were dampened after Federal Reserve Chairman Jerome Powell pledged “strong support” this week to ensure the US economy rebounded . Continue reading

The benchmark 10-year US Treasury yield rose 1.8 basis points to 1.3154%.

Mark Haefele, chief investment officer at UBS Global Wealth Management, an advisor to many of the world’s super-rich, said he expected interest rates to rise when the recovery fully takes hold.

“We believe the downtrend in yields will reverse as confidence in the economic recovery increases. However, we see 10-year yields rebound to 2% by year-end, in line with an ongoing equity rally.”

In Europe, Germany’s 10-year yield fell to a new three-month low in cautious trading ahead of the European Central Bank meeting next week.

In terms of foreign exchange, the major currencies were barely changed that day, but the dollar was heading for its best weekly gain in about a month. The dollar index, which tracks the greenback against a basket of six currencies, rose 0.134% to 92.707.

The euro lost 0.08% to $ 1.1803 while the yen rose 0.25% to $ 10.1400.

Oil prices prolonged losses from the last two sessions.

Brent crude fell $ 0.33 to $ 73.14 a barrel. U.S. crude fell $ 0.34 to $ 71.31 a barrel.

US gold futures fell 0.3% to $ 1,824.20 an ounce.

In Asia, MSCI’s broadest index for Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) lost 0.4% overnight, hurt by a 1.1% decline in the Chinese blue-chip index (.CSI300) and Taiwanese stocks (.TWII .) by 0.8%).

The Asian weakness was largely caused by the weak earnings of TSMC (2330.TW), Asia’s largest company by market capitalization outside of China, whose shares fell 4.1%. Continue reading

Reporting by Herbert Lash, additional reporting by Hideyuki Sano, Swati Pandey, Sujata Rao and Dhara Ranasinghe; Edited by Sam Holmes, Mark Heinrich, Catherine Evans and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

source https://thedailytradingnews.com/dollar-gains-stocks-slide-on-muddled-inflation-outlook/