GLOBAL-MARKETS-Stocks fall, US yields and dollar rise after inflation data

The Japanese currency had briefly strengthened against the U.S. dollar after Jiji news agency reported the Bank of Japan has started to make arrangements to end its negative interest rate policy at the March 18-19 meeting.

U.S. Treasury yields and the dollar rose on Thursday, while a gauge of global stocks fell after a stronger than expected reading on inflation cast doubt on the timing and size of rate cuts from the Federal Reserve this year. The producer price index (PPI) for final demand rose 0.6% last month, above the 0.3% climb forecast by economists polled by Reuters, after advancing by an unrevised 0.3% in January, the Labor Department said.

A reading on consumer inflation earlier this week also showed some stickiness in inflation. "Today's data, if you're going to take it at face value, which in this environment over the last few years has been a dangerous thing to do, but if you are going to take today's data at face value, it definitely has a bit of a stagflationary type of feel to it," said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina.

"I'm not surprised that the curve has steepened and that interest rates are higher. It's starting to hit the S&P but it's really hitting the more interest rate sensitive sectors of the market like small caps and real estate." On Wall Street, the Dow Jones Industrial Average fell 51.44 points, or 0.12%, to 38,995.03, the S&P 500 lost 6.70 points, or 0.12%, to 5,159.01, and the Nasdaq Composite gained 14.44 points, or 0.09%, to 16,193.35. The S&P real estate index was the worst performing of the 11 major S&P sectors, falling about 1.7%.

Other data showed U.S. retail sales rebounded last month with a 0.6% rise, but were below the 0.8% estimate while weekly initial jobless claims fell to 209,000 versus the 218,000 forecast. The yield on benchmark U.S. 10-year notes rose 8.1 basis points to 4.273% while the 2-year note yield, which typically moves in step with interest rate expectations, rose 4.8 basis points to 4.6703%.

Ahead of a Fed policy meeting next week and a rate cut essentially ruled out, the market has trimmed the odds of cut beginning at the June meeting, with expectations for a cut of at least 25 basis points at 63.6%, according to CME's FedWatch Tool, down from the 81.7% a week ago. MSCI's gauge of stocks across the globe fell 1.53 points, or 0.20%, to 773.77 while the STOXX 600 index lost 0.18%. Europe's broad FTSEurofirst 300 index shed 3.71 points, or 0.18%

The Bank of Japan also meets next week. Officials including Governor Kazuo Ueda have sought to temper expectations of an imminent shift out of negative interest rates, which has set the yen on course for its worst weekly performance in a month. The dollar index gained 0.39% at 103.15, with the euro down 0.37% at $1.0905.

Against the Japanese yen, the dollar strengthened 0.19% at 148.02. The Japanese currency had briefly strengthened against the U.S. dollar after Jiji news agency reported the Bank of Japan has started to make arrangements to end its negative interest rate policy at the March 18-19 meeting. Investors have been pricing in the chance of a change in policy this month, particularly after news of big pay hikes from some of Japan's biggest companies at this year's annual wage negotiations.

In commodities, U.S. crude gained 1.99% to $81.32 a barrel and Brent rose to $85.38 per barrel, up 1.59% to the day after the International Energy Agency's (IEA) latest oil market report predicted a tighter market in 2024.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)