US Stock Markets React to Higher Wholesale Inflation, Uncertainty Surrounding Interest Rate Hikes
New York – On Friday, stock markets experienced fluctuations as traders considered the implications of higher-than-expected wholesale inflation and the possibility of further interest rate hikes. Government data released on Friday revealed that wholesale prices in the United States increased in July due to rising service costs. The US markets closed with mixed results, with the tech-heavy Nasdaq Composite Index falling by 0.6 percent to end the week at 13,644.85. While producer prices have been declining since last year, consumer inflation has been slower to come down, causing mixed reactions in the financial markets.
Adam Sarhan from 50 Park Investments commented on the situation, stating, “We had inflation data which came in higher than expected but the market was caught off guard because yesterday’s (consumer) inflation data came in lower than expected. So the market likes certainty and right now we are getting a lot of uncertainty with respect to inflation.” European stocks also closed the week with losses, mirroring the downward trend seen in the Hang Seng and Shanghai composite indexes.
In Britain, the announcement of better-than-expected growth data on Friday increased the likelihood of the Bank of England implementing further interest rate hikes. The Office for National Statistics reported that gross domestic product grew by 0.2 percent in the April-June period, driven by strong output in June. Despite inflation levels remaining high, Chief Market Analyst Joshua Mahony from Scope Markets suggested that the UK could be on track for a soft landing similar to that currently being seen in the US. However, Mahony also cautioned that this narrative could lead to a more extended period of tightening with the Bank of England under no pressure to ease off on its current path of higher interest rates.
In the United States, consumer prices rose last month but not as much as analysts had expected, giving the Federal Reserve some leeway when it comes to monetary policy after a year of rate hikes. Although it is widely expected that policymakers will refrain from raising borrowing costs at the next meeting, analysts believe that additional rate hikes this year are still possible. “The (inflation) data… keeps alive the possibility of a further possible hike later in the year given the tightness in the labor market,” said Tapas Strickland from National Australia Bank.
In Asian stock market trading, Hong Kong continued to experience losses on Friday, despite e-commerce giant Alibaba reporting a rise in revenue that surpassed forecasts. The Tokyo stock exchange was closed for a public holiday. Meanwhile, oil prices saw an increase as the International Energy Agency raised its forecast for global oil demand growth, despite a weakened Chinese economy. “Oil prices have risen more than 20 percent since late June, buoyed by the actions of OPEC+ and the unilateral additional cuts by Saudi Arabia and Russia, both of which have been extended to September,” stated Craig Erlam, Senior Market Analyst at Oanda.
Key figures at the close of the market on Friday include:
– Dow: Up 0.3 percent at 35,281.40
– S&P 500: Down 0.1 percent at 4,464.05
– Nasdaq: Down 0.6 percent at 13,644.85
– FTSE 100: Down 1.2 percent at 7,524.16
– DAX: Down 1.0 percent at 15,832.17
– CAC 40: Down 1.3 percent at 7,340.19
– EURO STOXX 50: Down 1.4 percent at 4,321.33
– Hang Seng Index: Down 0.9 percent at 19,075.19
– Shanghai Composite: Down 2.0 percent at 3,189.25
In currency markets, the euro decreased against the dollar to $1.0952, while the pound rose to $1.2699. Additionally, oil prices saw an increase with Brent North Sea crude rising by 0.5 percent to $86.81 per barrel, and West Texas Intermediate rising by 0.4 percent to $83.19 per barrel.
