Stocks lose steam after U.S. data

By Sinéad Carew and Huw Jones

LONDON (Reuters) -MSCI’s global equities index gave up earlier gains on Friday after data showed modest U.S. inflation in April, while the dollar fell with Treasury yields as investors still bet on Fed interest rate cuts this year.

The U.S. Commerce Department said the personal consumption expenditures (PCE) price index, widely seen as the Fed’s favoured inflation indicator, increased 0.3% last month, in line with expectations and the March increase, while core PCE rose 0.2% compared with 0.3% in March.

“The markets got some relief. Even though progress on disinflation is very gradual, the trend is lower. April PCE showed encouraging signs that the progress hasn’t completely stalled,” said Angelo Kourkafas, senior investment strategist at Edward Jones, St Louis.

“When taken together with slower than expected consumer spending data that provided some confidence the Fed doesn’t need to be come more hawkish.”

Separately the Chicago Purchasing Managers Index (PMI), which monitors the health of manufacturing in the Chicago region, fell to 35.4 from 37.9 last month and was well below economist expectations for 41.

Analysts said they were focused on economic data rather than news that Donald Trump has become the first U.S. president to be convicted of a crime, ahead of a November vote when he will try to win back the White House from Democratic President Joe Biden.

On Wall Street at 11:14 a.m. the Dow Jones Industrial Average rose 59.89 points, or 0.16%, to 38,170.92 while the S&P 500 dropped 23.53 points, or 0.45%, to 5,212.11 and the Nasdaq Composite fell 192.94 points, or 1.15%, to 16,544.14.

MSCI’s gauge of stocks across the globe fell 2.24 points, or 0.29%, to 778.88. It was tracking for its second weekly decline in a row but heading for a monthly gain.

The STOXX 600 index was up 0.26%. Earlier, data showed euro zone inflation rose more-than-expected in May, though analysts said it was unlikely to stop the European Central Bank from lowering borrowing costs next Thursday, but may cement the case for a pause in July.

In currencies the dollar index was lower and on track for its first monthly decline in 2024 after the data.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.11% to 104.65.

The euro was up 0.14% against the dollar at $1.0847. But, against Japan’s yen, the dollar rose 0.27% to 157.23.

Some analysts reacted cautiously to the U.S. data. Kyle Chapman, FX markets analyst at Ballinger Group, said that while inflation is going in the right direction “policymakers are definitely not out of the woods yet.”

“I would caution against overinterpreting a single month’s data,” said Chapman.

In Treasuries, yields fell after the signs of inflation stabilization in April, suggesting to some that the potential for the Fed to cut rates later this year remained intact.

The yield on benchmark U.S. 10-year notes fell 5.6 basis points to 4.499%, while the 30-year bond yield fell 4.7 basis points to 4.6384%.

The two-year note yield, which typically moves in step with interest rate expectations, fell 4.6 basis points to 4.8831%, from 4.929% late on Thursday.

On the energy front, data from the U.S. Energy Information Administration showed that U.S. crude production rose in March to its highest this year, while product supplied fell.

Most recently, oil prices were lower as traders also focused on Sunday’s OPEC+ meeting that will determine the fate of the producer group’s output cuts.

U.S. crude lost 0.6% to $77.44 a barrel and Brent fell to $81.66 per barrel, down 0.24% on the day.

Gold fell 0.56% to $2,330.36 an ounce on the day but was tracking for a fourth straight monthly gain.

(Reporting by Sinéad Carew, Hannah Lang, Huw Jones; Editing by Sharon Singleton, Kirsten Donovan and Susan Fenton)