US inflation data lifts global stocks, lowers Treasury yields
Updated at 4:10 p.m. ET/2010 GMT
By Chuck Mikolajczak
NEW YORK, July 26 (Reuters) - A gauge of global stocks climbed for the first time in four sessions on Friday as equities steadied after a sharp selloff and U.S. economic data showed an improving inflation landscape, sending Treasury yields lower.
The Commerce Department said the personal consumption expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge, edged 0.1% higher last month after being unchanged in May, matching estimates of economists polled by Reuters.
In the 12 months through June, the PCE price index climbed 2.5%, also in line with expectations, after rising 2.6% in May.
The data likely sets the stage for the Fed to begin cutting rates in September, as the market widely expects.
"The more recent trend is building upon the market's confidence that we are on a trajectory that would get us to 2% over the long run," said Vail Hartman, interest rate strategist at BMO Capital Markets in New York.
"This is just another month of good inflation data from the Fed's preferred measure of inflation."
The Fed is scheduled to hold its next policy meeting at the end of July. Markets see a less than 5% chance for a rate cut of at least 25 basis points (bps) at that meeting, but are fully pricing in a September cut, according to CME's FedWatch Tool .
On Wall Street, U.S.stocks closed with strong gains, as small cap .RUT stocks were once again among the best performers in a market that continued its recent rotation into undervalued names.
However, megacap names also showed signs of stabilizing and the Nasdaq gained about 1% after three straight days of declines that sent the index down nearly 5%.
The Dow Jones Industrial Average .DJI rose 654.27 points, or 1.64%, to 40,589.34, the S&P 500 .SPX gained 59.88 points, or 1.11%, to 5,459.10 and the Nasdaq Composite .IXIC gained 176.16 points, or 1.03%, to 17,357.88.
Despite the gains, the S&P 500 was down 0.83% for the week. The Russell 2000, however, secured a third straight week of gains in which it has surged 11.51%, its strongest three-week performance since August 2022.
European sharesclosed higher, buoyed in part by corporate earnings after two consecutive sessions of declines, but still on track for a weekly decline.
MSCI's gauge of stocks across the globe .MIWD00000PUS rose 6.69 points, or 0.84%, to 803.47 but was on pace for its second straight weekly fall.
The STOXX 600 .STOXX index closed up 0.83% but finished down 0.27% on the week.Europe's broad FTSEurofirst 300 index .FTEU3 ended 17.10 points, or 0.85%, higher.
U.S. Treasury yields US10YT=RR were lower after theinflation data. The yield on benchmark U.S. 10-year notes US10YT=RR fell 6.2 basis points to 4.194% its second straight daily fall, but was slightly higher on the week.
The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations, fell 5.6 basis points to 4.3873% for its fourth weekly decline in the past five.
The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, slipped0.03% at 104.30, with the euro EUR= up 0.1% at $1.0855.
The greenback also weakened 0.1% at 153.78against the yen after the inflation PCE data and was on track for its biggest weekly percentage drop against the Japanese currency since early May.
The yen has strengthened on expectations a cut from the Fed is on the horizonwhile the Bank of Japan is expected to begin tightening policy byraising rates and reducing itsbond purchases inthe coming months. In addition,suspected BOJ intervention earlier this month also supported the currency.
Sterling GBP= strengthened 0.16% at $1.2871. The Bank of England will also hold a policy meeting next week, althoughuncertainty surrounds what action the central bank may take with regard to rates.
U.S. crude oil CLc1 settled down 1.43% to $77.16 a barrel and Brent LCOc1 fell 1.51% on the day to end at $81.13 per barrel on declining Chinese demand concerns and hopes of a Gaza ceasefire agreement.
World FX rates YTD http://tmsnrt.rs/2egbfVh
The Magnificent Seven versus the market https://reut.rs/3A2wswA
US consumer sentiment https://reut.rs/4fhCRE9
Annual change in US Personal Consumption Expenditures Price Index https://reut.rs/3A0qdcz
Reporting by Chuck Mikolajczak; Additional reporting by Sinéad Carew and Karen Brettell in New York and Johann M Cherian in Bengaluru; Editing by Mark Heinrich and Marguerita Choy
To read Reuters Markets and Finance news, click on https://www.reuters.com/finance/markets
For the state of play of Asian stock markets please click on: 0#.INDEXA
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