Stocks Rise, Oil Falls as Global Markets Monitor US-Iran Talks and Inflation Data
Global Market Movements and Key Economic Drivers
By Chris Prentice and Samuel Indyk
Market Overview
NEW YORK/LONDON, Aug 12 (Reuters) - Global equities were higher on Wednesday and oil prices dipped as traders eyed talks to end the Iran war and U.S. data showing only a slight rise in inflation damped some expectations for a Federal Reserve rate hike.
Talks between the U.S. and Iran were deadlocked. The United States and Yemen's Iran-aligned Houthis reported separate ship attacks. But oil prices dipped as investors weighed lower demand forecasts. [O/R]
Inflation Data and Federal Reserve Outlook
U.S. consumer prices increased 0.1% in July, in line with expectations, data showed on Wednesday. The small increase could weaken the argument for an interest rate increase from the Federal Reserve next month. Money markets have shown a roughly 50% chance of a hike heading into the data release.
The data "relieves some of the concerns that the Fed is being pushed toward a rate hike due to inflation, which is being fueled by higher energy prices," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
Gold prices rose more than 1% as the data dented rate hike bets. [GOL/]
The data did not capture the most recent rise in oil prices, which have hurtled higher amid tensions over the U.S. and Iran.
Stock Market Performance
MSCI's gauge of stocks across the globe rose 0.37% to 1,154.92.
On Wall Street, the Dow Jones Industrial Average rose 0.10% to 53,848.98, the S&P 500 added 0.31% to 7,752.35 and the Nasdaq Composite traded up 0.65% at 26,617.60.
AI Sector Influence
Upbeat results from AI cloud company CoreWeave after the market closed on Tuesday gave the AI trade another boost.
Regional Market Highlights
In Europe, the pan-continental STOXX 600 fell 0.04% while Europe's broad FTSEurofirst 300 index lost 0.09%.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan closed higher by 0.92% at 1,636.51.
Emerging market stocks rose 1.05% to 1,682.95.
Geopolitical Developments
Talks to End Iran War Continue
Markets were still following talks to end the war and reopen the Strait of Hormuz to shipping traffic.
The U.S. and Yemen's Iran-aligned Houthis reported separate attacks on shipping on Tuesday, while both Iran and the U.S. have stepped up their rhetoric in recent days.
Iran's most senior security official said on Tuesday the Strait of Hormuz will remain closed unless the U.S. accepts Iran's conditions.
Still, investors have been calm.
"Our base case for a long time has been a gradual but messy de-escalation," said Dorian Carrell, head of multi-asset income at Schroders.
"We don't expect traffic (through the Strait of Hormuz) to go to its full capacity. We think that puts a floor on the oil price and maintains an energy-driven inflationary driver in markets in the near- to medium-term."
Brent crude futures fell 0.26% to $88.68 per barrel, and U.S. crude fell 0.49% to $82.79. Both benchmarks settled more than $1 higher on Tuesday, marking their highest closes since July 31.
Central Bank Policy and Currency Movements
Markets Anticipate a BOJ Hike
The yield on benchmark U.S. 10-year notes fell 1.81 basis points to 4.666% and the yield on the benchmark German 10-year Bunds fell 3.77 basis points to 3.139%.
Markets are increasingly pricing in an early rate hike in Japan, putting pressure on the nation's shorter-dated bonds. Investors price in an almost 60% chance of a quarter-point hike at the Bank of Japan's September meeting.
Currency and Commodity Updates
The yen strengthened 0.11% to 159.08 per dollar, remaining off last week's high of 155.20 after several suspected rounds of intervention.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.08% to 99.73, with the euro up 0.1% at $1.1552.
Spot gold rose 1.61% to $4,436.99 an ounce.
(Reporting by Samuel Indyk in London and Rocky Swift in Tokyo and Chris Prentice in New York and additional reporting by Sinéad Carew; Editing by Edwina Gibbs, Stephen Coates and Barbara Lewis)