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GLOBAL MARKETS-Stocks, dollar reverse to risk-off mode after U.S. inflation data is higher than expected

GLOBAL MARKETS-Stocks, dollar reverse to risk-off mode after U.S. inflation data is higher than expected

Reuters · 09/13/2022 10:37
GLOBAL MARKETS-Stocks, dollar reverse to risk-off mode after U.S. inflation data is higher than expected

Updates after U.S. market open, adds commentary, changes byline, previous dateline London

Dollar reverses course to rally after inflation surprise

Global stock index turns , Wall Street falls

Oil prices lose ground, Treasury yields rise

By Sinéad Carew

- The dollar index reversed course to rally sharply and U.S. stocks sank while Treasury yields climbed after data showed U.S. consumer prices rising faster than expected in August, prompting bets for more aggressive Federal Reserve rate hikes.

Oil futures give up earlier gains in choppy trading after declining gasoline prices in August were offset by gains in rent and food costs. The Consumer Price Index gained 0.1% last month versus expectations for a 0.1% decline and after being unchanged in July, the Labor Department said on Tuesday.

U.S. stock indexes had rallied on Monday and also gained ground last week as investors were betting that Tuesday's data would show some dampening in inflation. .N

"With the rally over the last week and yesterday, the market's risk reward coming into this report was a little skewed to the downside anyway even if we did get a report that was in-line or slightly below expectations. This report was a surprise with hotter inflation," said Mona Mahajan, senior investment strategist at Edward Jones.

"This was another disappointment. It's the old Charlie Brown analogy. Every time we're ready to kick the ball it's moved away from us."

The Dow Jones Industrial Average .DJI fell 718.06 points, or 2.22%, to 31,663.28, the S&P 500 .SPX lost 103.91 points, or 2.53%, to 4,006.5 and the Nasdaq Composite .IXIC dropped 389.45 points, or 3.17%, to 11,876.96.

The pan-European STOXX 600 index .STOXX lost 1.02% and MSCI's gauge of stocks across the globe .MIWD00000PUS shed 2.00%.

In currencies the dollar index =USD rose 0.97%, with the euro EUR= down 0.85% to $1.0033.

The Japanese yen weakened 0.84% versus the greenback at 144.05 per dollar, while Sterling GBP= was last trading at $1.1563, down 0.99% on the day. The Mexican peso lost 0.94% versus the U.S. dollar at 20.03.

U.S. Treasury yields rose and the inversion of a closely watched part of the yield curve widened after the inflation data also bucked bond investor expectations.

Benchmark 10-year US10YT=RR last fell 19/32 in price to yield 3.4351%, from 3.362% late on Monday. The 30-year bond US30YT=RR last fell 24/32 in price to yield 3.5558%, from 3.513%. The 2-year US2YT=RR last fell 10/32 in price to yield 3.7371%, from 3.571%.

The gap between yields on two- and 10-year US2US10=RR, seen as a recession harbinger, was at -27.3 basis points. US/

Oil prices were lower after the inflation data implied more hefty rate hikes from the Fed and renewed COVID-19 curbs China, the world's second-largest oil consumer, also weighed on crude prices.

Spot gold XAU= dropped 1.1% to $1,704.50 an ounce. U.S. gold futures GCc1 fell 1.37% to $1,704.50 an ounce.

In precious metals, gold prices fell more than 1% as the dollar jumped after an unexpected rise in monthly consumer prices that could support the case for aggressive rate hikes from the Federal Reserve.

Spot gold XAU= dropped 1.1% to $1,704.50 an ounce. U.S. gold futures GCc1 fell 1.37% to $1,704.50 an ounce.


(Additional reporting by Marc Jones in London, Yoruk Bahceli in Amsterdam; Editing by Bradley Perrett, Clarence Fernandez and Louise Heavens)

((sinead.carew@thomsonreuters.com))

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