Stocks rise, dollar retreats ahead of inflation data

LONDON, July 11 (Reuters) – Global stocks rose and the dollar fell ahead of U.S. inflation data that could quickly end a rate hike by the Federal Reserve, while the prospect of China’s economic growth helped lift commodities such as oil and copper. .

Markets await Wednesday’s US inflation data to see if price pressures continue to moderate, which could provide clues on the interest rate outlook.

The MSCI All-World Index (.MIWD00000PUS) rose 0.3%, lifted by gains in European shares, the STOXX 600 (.STOXX) rose 0.35% in early trade, and in Asia Chinese shares extended support to the property sector.

U.S. stock index futures rose 0.1-0.2%, marking a modest gain in the opening hours.

Investors were digesting comments from several Federal Reserve officials on Monday that the level of inflation warrants additional rate hikes, but the central bank is nearing the end of its current monetary policy tightening cycle.

Economists polled by Reuters had expected the consumer price index to rise 3.1% in June, after a 4% increase in May. It will be the lowest since March 2021. The key rate is expected to fall to 5% in the third month from 5.3%, but that is more than twice the central bank’s 2% target.

Last week’s employment report showed fewer workers than expected in nonfarm payrolls last month, unleashing a wave of dollar selling, but little moved the needle on rate expectations.

“I take (market) movements, especially when they’re so close between the jobs report and inflation, with a pinch of salt,” OANDA market strategist Craig Erlam said.

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“There’s a big eye on tomorrow’s inflation data – it’s a day late for the July meeting. That hike is basically sealed and it’s going to take something weaker on the inflation side to reverse it,” he said.

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A flagging dollar

The dollar index, which measures the U.S. currency’s performance against six other countries, fell 0.2% on the day to a two-month low, in line with a retreat in U.S. Treasury yields.

The yield on the benchmark 10-year note was last down 4 basis points at 3.964%, down from less than 4% the previous day.

“With mounting evidence of near-term inflationary trends, there are questions about whether inflation will remain at uncomfortably high levels over the medium term,” said Deutsche Bank strategist Jim Reid.

The Japanese yen rose to a one-month high against the dollar, while the US currency fell 0.6% to 140.51 on the day, tracking falling Treasury yields.

Meanwhile, the prospect of a boost to the broader Chinese economy helped push up the prices of crude oil and other industrial commodities such as copper and iron ore.

Chinese regulators on Monday extended some policies in a rescue package introduced in November to boost liquidity in the troubled real estate sector.

Brent crude, struggling to break 18-month lows, rose 0.4% to $78 a barrel, while U.S. futures rose 0.5% to $73.35.

Copper rose 0.5% to trade at $8,4000 a tonne on the London Metal Exchange. It is headed for its first annual loss since 2018, driven by pent-up demand from China.

Some of Wall Street’s biggest firms, including JPMorgan ( JPM.N ), Citigroup ( CN ) and Wells Fargo ( WFC.N ), will report second-quarter earnings results this week.

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Analysts expect revenue to contract 6.4% in the second quarter year-on-year, according to Refinitiv’s IBES data.

Additional reporting by Julie Zhu in Hong Kong; Editing by Sam Holmes, Jamie Freed and David Evans

Our Standards: Thomson Reuters Trust Principles.

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