Stocks Edge Lower On Jump In US Consumer Prices

Stock markets were slightly softer Tuesday on news of the biggest jump in US inflation in more than two decades and disappointment in results from US investment banks

London, (UrduPoint / Pakistan Point News - 13th Jul, 2021 ) :Stock markets were slightly softer Tuesday on news of the biggest jump in US inflation in more than two decades and disappointment in results from US investment banks.

As trading ended in London, Frankfurt and Paris, major indices hovered around the zero mark, while the Dow Jones index was also a tiny bit lower in midday New York exchanges.

US inflation spiked again in June, jumping by 5.4 percent over the past 12 months for its biggest increase since August 2008.

And even when the more volatile food and energy prices were excluded, "core" inflation gained an unadjusted 4.5 percent, the biggest increase since November 1991, the Labor Department said.

"The core reading of 4.5 percent is perhaps the most notable given that it removes the kind of volatile aspects that the Fed could use to explain away such a rise," remarked Joshua Mahony, market analyst at the online trader IG.

Investors are becoming concerned that strong inflation as countries emerge from Covid lockdowns will cause the US Federal Reserve and other central banks to hike interest rates sooner than expected, hindering the economic recovery.

The Fed has estimated several times that stiff increases in consumer prices will be transitory, and so far the markets have accepted that argument.

But "if today's number doesn't mark the high-water mark, then Fed officials may start to shift a little bit more uncomfortably as we head into the autumn," commented Michael Hewson, market analyst at CMC Markets.

"For now, markets are buying the transitory narrative, however if the current trend continues, 'transitory' will be doing a lot more heavy-lifting than it is doing now," he added.

ThinkMarkets analyst Fawad Razaqzada noted that the latest numbers represented "the fourth consecutive month of above-forecast inflation on both the headline and core fronts.

" A key driver has been surging oil prices.

After easing lower on Monday, they gained ground again Tuesday on news that demand had surged in June as rising vaccination rates helped underpin robust economic activity, and could continue to strengthen this month, according to the International Energy Agency.

"The oil market could get a lot tighter very quickly and that could mean the recent pullback might have run its course," said Edward Moya, an analyst at OANDA.

On the corporate front, second-quarter earnings from US investment banks gave investors a yardstick to measure the performances of financial stocks with.

Headline numbers for JPMorgan looked good, but on closer scrutiny specialists were less than impressed with the results from some basic operations.

"The bar was set too high for JPMorgan and today's results don't paint a good picture for the rest of the banks," remarked Edward Moya, an analyst at OANDA.

He also noted that news from planemaker Boeing of new problems with the 787 model was weighing on the Dow index in New York.

- Key figures around 1615 GMT - New York - DOW: DOWN 0.1 percent at 34,965.82 points EURO STOXX 50: FLAT at 4,094.56 London - FTSE 100: FLAT at 7,124.72 (close) Frankfurt - DAX 30: FLAT at 15,789.64 (close) Paris - CAC 40: FLAT at 6,558.47 (close) Tokyo - Nikkei 225: UP 0.5 percent at 28,718.24 (close) Hong Kong - Hang Seng Index: UP 1.6 percent at 27,963.41 (close) Shanghai - Composite: UP 0.5 percent at 3,566.52 (close) Euro/dollar: DOWN at $1.1811 from $1.1864 at 2100 GMT Pound/dollar: DOWN at $1.3850 from $1.3886 Euro/pound: UP at 85.27 from 85.42 pence Dollar/yen: UP at 110.39 from 110.35 yenBrent North Sea crude: UP 1.4 percent at $76.23 per barrelWest Texas Intermediate: UP 1.3 percent at $75.06 per barrel