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Wall Street shares mixed ahead of U.S. inflation data over the weekend, which could determine the future direction of central banks ’monetary policies.
The powerful S&P 500, Wall Street’s dominant equity indicator, fell 0.3%, while the technology-focused Nasdaq Composite index rose 0.2% in trading the afternoon.
However, the Stoxx Europe 600 gained 0.2% to end the session in a maximum time, as investors changed relatively cheap European equities. The UK FTSE 100 rose 0.1%.
Economists surveyed by Bloomberg expect U.S. inflation data on Thursday to show that consumer prices rose 4.7% in May from the same month last year, after a sharp unexpected rise in the year. ‘April. Core inflation, which eliminates volatile energy and food costs, is expected to reach a year-on-year reading of 3.4%, the highest since 1993, according to Data from the Fed of Sant Lluís.
The Federal Reserve, which meets next week, sees strong inflation as a temporary effect of the reopening of the economy following the pandemic shutdowns. However, investors are alert to persistent price rises that could force monetary policy makers to raise interest rates faster than expected. Since March last year, the Fed has bought $ 120 billion in assets each month and set lending costs at record lows.
“This will be a year of transition for monetary policy,” said Gergely Majoros, a member of the investment committee of European fund manager Carmignac. After getting used to the strong support of central banks, he added, “the transition will be difficult for investors to manage.”
U.S. Treasury Secretary Janet Yellen told Bloomberg Sunday that it would be “an advantage” if President Joe Biden’s multimillion-dollar fiscal stimulus led to slightly higher rates.
“We’ve been fighting too low inflation and too low interest rates for a decade,” Yellen said.
Financial markets were “hyperactive on cheap money,” added Patrick Spencer, vice president of equities broker Baird, referring to the jumps in so-called meme stocks favored by retailers and frantic price movements in cryptocurrencies. “We have to get the sugar out.”
Film chain AMC and software group BlackBerry had gained more than 13% on Monday, while retailer GameStop had risen about 10%.
Stock market investors were also concerned, adds Majoros de Carmignac, about companies failing to meet analysts ’bullish revenue expectations.
After a boom in first-quarter earnings on both sides of the Atlantic, as companies benefited from the demand that resurfaced as economies opened up, forecasts have broadly improved their expectations. of second quarter results.
“Analysts’ optimism is reaching extreme levels, ”Liberum strategists Joachim Klement and David Mak commented in a research note.
“We expect the next earnings season to become a reality test for many analysts and investors.”
The yield on the ten-year US Treasury bond, which moves inversely to its price, rose 0.01 percentage point to 1.565 percent. The yield has risen by about 0.9% since early 2021, as investors predicted higher inflation, which erodes the value of fixed interest payments on bonds.
Brent crude fell 0.5 percent to $ 71.53 a barrel after hitting its highest level since May 2019 in Asian trade on Monday.
In foreign currency, the Mexican peso added 0.8% to $ 19.80 after Andrés Manuel López Obrador he seemed ready to lose a third surface in the lower house of the Mexican Congress that he had needed to make significant constitutional changes. The euro was up 0.3% against the dollar at $ 1.2199. The pound sterling gained 0.2% to $ 1,4177.
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