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Global equity markets drop as investors await inflation data

global equity

MSCI’s gauge of stocks across the globe dropped 0.18%, while Europe’s pan-regional STOXX 600 index gained 0.34% to a record close

Global equity markets mostly faltered on Wednesday as investors await fresh inflation data to better evaluate the possibility of Fed interest rate cuts, while the dollar inched up on expectations of U.S. economic out-performance.

European stocks advanced to a record high, bolstered by company earnings, but stocks on Wall Street slipped as a downbeat forecast from Uber knocked its shares down 5.7% and made the ride-hailing company one of the biggest decliners on the S&P 500.

The yen softened for a third day and kept investors wary of intervention from Japanese authorities, while crude oil inched up from near two-month lows.

The big concern among traders and investors is whether inflation is on course to reach the U.S. central bank’s 2% target and when Fed Chair Jerome Powell might cut rates.

Fed Boston President Susan Collins said the U.S. economy needs to cool off as an avenue toward getting inflation back to the central bank’s 2% target.

The market is still very much waiting for the CPI report next Wednesday. We are basically stuck in a bit of a range here until we get data, according to Gennadiy Goldberg, head of U.S. rates strategy at TD Securities.

Investors are still very cautious at this point. They do not want to over extrapolate from one data point or a couple of developments, he said.

MSCI’s gauge of stocks across the globe dropped 0.18%, while Europe’s pan-regional STOXX 600 index gained 0.34% to a record close. On Wall Street, the Dow Jones Industrial Average added 0.44%, the S&P 500 closed unchanged and the Nasdaq Composite slipped 0.18%.

Global stocks declined sharply in April as strong U.S. economic data caused investors to rein in their bets on rate cuts from the Fed and other major central banks this year.

Investors continue to underestimate or miscalculate interest rate cuts, according to Michael Arone, chief investment strategist at the U.S. SPDR business at State Street Global Advisors.

However, if the economy expands with inflation anchored and the labour market reasonably strong, “that makes for a pretty good backdrop for stocks,” he said. So unless some of those ingredients change, the markets will continue to do OK.

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