Markets were mixed Wednesday after an unremarkable US inflation report tempered expectations for an interest rate cut early next year, with attention moving to the Federal Reserve’s policy statement later in the day.
All three indexes on Wall Street ended positively — with the S&P 500 at a near three-year high — following news that consumer prices slowed marginally last month, suggesting the central bank is on course in its fight against inflation.
Data showing core prices remained resilient did, however, leave traders disappointed and highlighted the battle officials still have in getting inflation down to their target.
While there is a broad expectation that the bank will cut rates next year, traders now think it will be by less than previously tipped and the first will be slightly later.
“Knocking inflation down from last year’s highs is one thing, getting it to the Fed’s two percent target is another,” Chris Larkin at E*Trade from Morgan Stanley said.
“The trends still point to a slowing economy and cooling inflation. That means lower rates are still on the 2024 horizon — just not as near as some people may be hoping.”
The Fed’s two-day meeting concludes later Wednesday and most expect it to stand pat on rates, but its statement and comments from boss Jerome Powell will be parsed for pointers on its 2024 plans.
Economic forecasts and the bank’s so-called dot plot for rate hikes will also be unveiled.
The latest figures follow a string of readings pointing to a slowing economy and cooling labour market but at a pace that has not yet sparked worries about recession.
Powell and several other Fed officials have warned that while the figures are positive, they would make decisions based on data and would keep the door open to another hike if needed.
“The Fed will want to see further cooling in labour data before it commences rate cuts and it is likely to send a message of patience to the markets,” said Franck Dixmier at AllianzGI.
After a strong performance on Tuesday, Asian markets diverged Wednesday.
Tokyo, Sydney, Wellington and Taipei rose but Hong Kong, Shanghai, Singapore, Seoul, Manila and Jakarta were all down.
Chinese traders were left disappointed by a two-day economic meeting between leaders in Beijing.
They pledged more to support the country’s troubled property sector as part of plans to lift the world’s second-largest economy out of an uneven rebound.
But analysts said there were no new measures and a lack of stimulus frustrated many.
“There was no surprise from the conference,” said Hao Hong at Grow Investment Group.
“Some may be disappointed by not seeing a specific stimulus package coming out of the meeting. The focus on security and risk, as well as high-quality development, naturally implies that at this stage high-quality growth trumps fast growth.”
Oil prices ticked up slightly but made only a small dent in the losses of almost four percent suffered Tuesday, which came on worries about surging output by the United States as well as concerns about demand from China owing to its struggling economy.
West Texas Intermediate and Brent are now sitting around their lowest levels since the end of June.
Key figures around 0230 GMT
Tokyo – Nikkei 225: UP 0.4 percent at 32,987.69 (break)
Hong Kong – Hang Seng Index: DOWN 0.7 percent at 16,267.59
Shanghai – Composite: DOWN 0.5 percent at 2,989.01
Dollar/yen: UP at 145.52 yen from 145.49 yen on Tuesday
Euro/dollar: DOWN at $1.0787 from $1.0800
Pound/dollar: DOWN at $1.2556 from $1.2567
Euro/pound: DOWN at 85.90 pence from 85.91 pence
West Texas Intermediate: UP 0.2 percent at $68.75 per barrel
Brent North Sea crude: UP 0.2 percent at $73.40 per barrel
New York – Dow: UP 0.35 percent at 36,577.94 (close)
London – FTSE 100: FLAT at 7,542.77 (close)
