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Shares on Wall Street were down the week ahead of U.S. inflation data, which could determine the future direction of central banks ’monetary policies.
The broad-based S&P 500, a measure of Wall Street’s core capital, fell 0.3 percent. The technology-oriented Nasdaq Composite index was flat.
The Stoxx Europe 600 gained 0.2 percent to end the session on record, however, investors turned around quite cheap European shares. The UK FTSE rose 100 per cent to 0.1 per cent.
Economists surveyed by Bloomberg expect U.S. inflation data to rise in consumer prices by 4.7% in May from the same month last year, after an unexpectedly sharp rise in April on Thursday. Core inflation, which eliminates volatile food and energy costs, is projected to reach 3.4 percent year-on-year, the highest since 1993 St. Louis Fed data.
The Federal Reserve, which will meet next week, sees strong inflation as a temporary effect of the reopening of the economy after the pandemic closes. Investors are wary, however, of the ongoing price rises that may require policy makers to raise interest rates faster than expected. Since March last year, the Fed has purchased $ 120 billion in assets on a monthly basis and kept borrowing costs at record lows.
“It will be a year of transition to monetary policy,” said Gergely Majoros, a member of the investment committee of European fund manager Carmignac. After getting used to the strong support of central banks, he added, “the transition will be difficult for investors to manage.”
U.S. Treasury Secretary Janet Yellen told Bloomberg on Sunday that it would be a “plus” if President Joe Biden’s multimillion-dollar fiscal stimulus rates were slightly higher.
“We’ve been fighting too low inflation and too low interest rates for a decade now,” Yellen said.
Financial markets were “hyperactive in exchange for cheap money,” added Patrick Spencer Baird, vice president of stock market shares. meme stocks retailers and the price moves tremendously in cryptocurrencies. “We need to get the sugar out.”
Stock market investors were also concerned, added Carmignac’s Majoros, a company that doesn’t meet analysts ’analytical earnings expectations.
After a good earnings season on both sides of the Atlantic in the first quarter, as they benefited from recovered demand as the economy reopened, advertisers have greatly improved their expectations for second-quarter results.
“Analyst optimism is reaching extreme levels,” Liberum strategists Joachim Klement and David Mak commented in a research note.
“We expect the next earnings season to become a reality check for many analysts and investors.”
The yield on the U.S. 10-year Treasury bond, which moves in the opposite direction to its price, rose 0.01 percentage points to 1,565 percent. Yields have risen by about 0.9 per cent since early 2021 as investors forecast higher inflation, which erodes the value of fixed interest payments on bonds.
Brent crude fell 0.6 percent to $ 71.45 a barrel after hitting its highest level in Asian trade since May 2019 on Monday.
In currency, the Mexican peso gained 0.9 percent after $ 19.77 after Andrés Manuel López Obrador he looked complete to lose a two-thirds majority he needed to make major constitutional changes in the lower house of the Mexican Congress. The euro rose 0.3 percent against the dollar to $ 1.2199. Sterling gained $ 0.2 percent to $ 1.4177.
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