Stocks rise on tame inflation outlook, dollar eases

Mae Love
March 14, 2019

Treasury yields edged up as USA orders for business equipment increased in January by the most in six months and a producer price index signalled modest pressure on inflation. The significance of such a passage is that if it were to pass, the British Parliament would then vote the next day (Thursday) on whether to instruct the Government to request a postponement of the Brexit departure date beyond 29 March 2019 from the European Union.

The Stoxx Europe 600 Index gained 0.5 percent.

The grounding gives Boeing time to address any problems and not face another potential disaster, said Tim Ghriskey, chief investment strategist at Inverness Counsel in NY. Lawmakers voted to avoid a no-deal split on Wednesday in a decision welcomed by markets, although it did little to suggest what kind of Brexit a majority might support.

"Earnings estimate revisions continue to come downward, but that does not seem for the moment to be fazing equity investors", he said.

A Fed on hold for hiking rates suggests concern about economic growth, which can be seen in a narrowing yield gap in 10-year and two-year U.S. Treasury debt, Geraghty said. An inverted yield curve historically has been an indicator of recession.

Wednesday's vote boosted investor optimism in European equities too, with the pan-European STOXX 600 index climbing 0.6 percent while London's FTSE 100 added 0.1 percent as sterling extended gains.

The S&P 500 added to its best advance since January, with major media shares leading gains.

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Sterling was down 0.4 per cent at US$1.3285 (RM5.428) after going as high as US$1.3380 the previous day, its strongest since June 2018. The pound started the day higher after Prime Minister Theresa May announced a revised divorce deal, but dropped by as much as 1.1% versus the dollar as Attorney General Geoffrey Cox said the risks surrounding the Irish backstop - a major sticking point for those who support Brexit - were unchanged.

The Japanese yen gained 0.2 percent to 111.1 per dollar. The dollar fell and 10-year Treasury yields turned negative after core inflation cooled.

"After yesterday's CPI data, yields fell. But the dollar has been weakened by declining US yields and any reprieve for the currency is likely to be limited". The price of oil, one of Canada's major exports, rose as US crude inventories unexpectedly fell and an official forecast of crude oil supply growth from the world's top producer was revised lower.

USD/JPY: The U.S. dollar dipped against the yen on Wednesday, as tepid U.S. economic data reinforced views the Federal Reserve would be patient on monetary policy.

Oil prices extended overnight gains with US crude up 15 cents per barrel at $58.41 and Brent adding 22 cents to $67.77.

Spot gold gained 0.6 percent to $1,309.30 per ounce as of (2056 GMT), its highest level since March 1.USA gold futures settled 0.9 percent higher at $1,309.3 per ounce.

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