LONDON (Reuters) – Stocks edged up, oil prices recovered and bond yields fell on Wednesday after data showed U.S. consumer prices rose at a slightly slower-than-expected pace last month, evidence that the Federal Reserve was succeeding in its fight against inflation.<\/p>\n\n\n\n
MSCI’s gauge of global equity performance rose 0.03% after the Labor Department’s Consumer Price Index (CPI) rose 4.9% year-over-year in April, against expectations of 5%.<\/p>\n\n\n\n
The odds favoring a ‘pause’ in rate hikes in June sharply increased after the data, sending Dow e-minis up 78 points, or 0.23%, while S&P 500 e-minis rose 14.75 points having been down before the key data release.<\/p>\n\n\n\n
“Markets are reacting positively, with a drop in short-term rates and a pick-up in equity futures,” said John Leiper, Chief Investment Officer at Titan Asset Management.<\/p>\n\n\n\n
“Bigger picture, I think the market is hyper fixated on the \u2018pause\u2019 but a pause is still restrictive overall,” he said.<\/p>\n\n\n\n
U.S. and Brent oil futures likewise turned positive having fallen as much as $1 in earlier trading, on concerns a rise in U.S. inventories showed weakening demand.<\/p>\n\n\n\n
Economists had expected the headline CPI to hold steady at an annual 5% and core CPI to moderate very slightly to 5.5%, with anything stickier seen likely to confound bets interest rates will fall.<\/p>\n\n\n\n
The dollar index hit a session low of 101.36 after the headline April inflation data, while benchmark 10-year German bond yields edged down 4 basis points.<\/p>\n\n\n\n
The broad-based rally across asset classes showed investors relieved that the U.S. is making progress in the battle against inflation which has roiled markets worldwide this year.<\/p>\n\n\n\n
Problems still loom in the world’s biggest economy however, with lawmakers at an impasse over the approaching U.S. debt ceiling.<\/p>\n\n\n\n
President Joe Biden and top lawmakers failed to break a deadlock over raising the $31.4 trillion U.S. debt limit, but vowed to meet again before June, when the Treasury projects it will start struggling to meet its obligations.<\/p>\n\n\n\n
Two-year Treasury yields fell to 3.9389%.<\/p>\n\n\n\n
CHINA CRACKDOWN<\/p>\n\n\n\n
Foreign exchange markets had been treading water while markets weighed policymakers’ rhetoric against traders’ conviction that U.S. interest rates should fall.<\/p>\n\n\n\n
Emerging markets currencies rallied on Wednesday following the U.S. data, with MSCI’s index up 0.26%.<\/p>\n\n\n\n
European Central Bank board member Isabel Schnabel said on Tuesday expectations for rate cuts were misplaced, but that didn’t give the euro much of a boost, as traders had been reluctant to sell dollars too hard ahead of the CPI data.<\/p>\n\n\n\n
China’s weak import figures for April held down Chinese and Hong Kong stocks for a second straight session, as investors fret the market rebound from the reopening of the economy is fading into an uneven recovery.<\/p>\n\n\n\n
Hong Kong’s Hang Seng fell 0.5%. The Shanghai Composite dropped 1.3% and the yuan fell to a two-week trough.<\/p>\n\n\n\n
An apparent crackdown on due diligence firms is roiling the sector and unnerving investors. Reuters reported CICC Capital, a unit of leading Chinese investment bank China International Capital Corp stopped using consultancy Capvision.<\/p>\n\n\n\n
Spot gold turned positive after the CPI data, last trading up 0.3%.<\/p>\n