Stocks, dollar, bond yields fall: data, Trump tariffs in focus
Japan's yen strengthens to almost five-week high vs dollar
US PCE data roughly in line with expectations
Oil settle near flat with gasoline build, ceasefire in focus
Updated to afternoon trading
By Sinéad Carew and Medha Singh
Nov 27 (Reuters) -MSCI's global equities index edged lower and the dollar slipped with Treasury yields on Wednesday as investors digested the latest economic data and the potential impact of policies from the incoming U.S. administration, including tariff threats.
Oil prices settled close to flat after a large, surprise build in U.S. gasoline stockpiles and worries about the outlook for U.S. interest rates in 2025 countered easing supply concerns from a ceasefire deal between Israel and Hezbollah.
Equities lost some ground after datashowed U.S. consumer spending increased solidly in October, suggesting the economy kept a strong growth pace but that progress dampening inflation has stalled recently. In the 12 months through October core inflation, which the Federal Reserve tracks monetary policy, increased 2.8% after climbing 2.7% in September.
"This was no earth-shattering news for the markets. We all expected that inflation would pop up a little bit, but inflation is not getting out of hand. And that's the key,” said Peter Cardillo, chief market economist at Spartan Capital Securities. "This paves the way for a 25 basis point cut in December and then probably a pause."
After the data, traders were bettingon a 70% probability for a Fed rate cut in December compared with a roughly 59% probability on Tuesday, according to CME Group's FedWatch tool.
On Wall Street, at 02:50 p.m. the Dow Jones Industrial Average .DJI fell 112.78 points, or 0.25%, to 44,747.53, the S&P 500 .SPX fell 20.60 points, or 0.34%, to 6,001.10 and the Nasdaq Composite .IXIC fell 108.10 points, or 0.56%, to 19,068.01.
MSCI's gauge of stocks across the globe .MIWD00000PUS fell 0.56 points, or 0.07%, to 858.52, while Europe's STOXX 600 .STOXX index closed down 0.19% earlier in the day.
Investor reactions to the data took into account President-elect DonaldTrump's late Monday threat toimmediately put a 25% tariff on all products from Mexico and Canada when he takes office in January, and impose an additional 10% tariff on goods from China. The threat already drewwarnings of retaliation.
"Today’s data shouldn’t change views of the likely path for disinflation, however bumpy. But a lot of observers, probably including some at the Fed, are looking for reasons to get more hawkish on the outlook given the potential for inflationary policy change like new tariffs,” said David Alcaly, lead macroeconomic strategist at Lazard Asset Management in an email.
Wednesday's market moveswere likely magnified by lower liquidity as investors turned their focus to Thursday's U.S. Thanksgiving holiday, according to Alex Atanasiu, portfolio manager at Glenmede Investment Management. Thursday's market close will be followed by a shorter trading day on Friday.
In Treasuries, the yield on benchmark U.S. 10-year notes US10YT=RR fell 5.8 basis points to 4.244%, from 4.302% late on Tuesday while 30-year bond US30YT=RR yield fell 5.3 basis points to 4.427%.
The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations, fell 3.9 basis points to 4.215%, from 4.254% late on Tuesday.
In currencies, the dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.75% to 106.04.
Against the Japanese yen JPY=, the dollar weakened 1.38% to 150.98 withthe yen touchingits strongest level versus the greenback in almost five weeks.
The euro EUR= was up 0.75% at $1.0565 while sterling GBP= strengthened 0.85% to $1.2675.
After falling on Tuesday, the Mexican peso MXN= strengthened 0.23% versus the dollar at 20.628 while the Canadian dollar CAD= strengthened 0.2% versus the greenback.
The largest cryptocurrency, bitcoin BTC=, attempted to find its feet after a four-day retreat from a record high of $99,830. It was last up 5.36% to $96,567.00.
Oil prices had flitted between red and green having fallen on Tuesday following confirmation of the Israel-Hezbollah ceasefire after selling off more sharply on Monday in anticipation of such anagreement.
U.S. crude CLc1 settled down0.07% at $68.72 a barrel, while Brent LCOc1 ended at $72.83 per barrel, up 0.03%on the day.
Inprecious metals, spot gold XAU= rose 0.1% to $2,634.62 an ounce. U.S. gold futures GCc1 rose 0.56% to $2,635.90 an ounce.
World FX rates YTD http://tmsnrt.rs/2egbfVh
Asian stock markets https://tmsnrt.rs/2zpUAr4
Reporting by Sinéad Carew, Stephen Culp, Medha Singh and Kevin Buckland; Additional reporting by Tom Westbrook; Editing by Marguerita Choy and Mark Potter
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