The report shows that the U.S. stock market fell after a sharp rise in producer prices
A report showed that wholesale prices in the United States rose at a record rate last month, increasing the pressure on the Fed to end its bond purchase program, and the stock market fell.
Wall Street’s benchmark S&P 500 Index fell 1.3%, with creative software maker Adobe’s stock price falling 8.9%. The technology-focused Nasdaq Composite Index fell 2%. A 4.1% drop in Microsoft’s stock price caused both indexes to fall.
Producer prices in the United States rose 9.6% in November from the same month of the previous year, the largest increase since 2010 and a sharp increase from 8.8% in the previous month. Economists surveyed by Reuters had previously expected prices to rise by 9.2% in November.
“The rapid rise in producer prices further confirms that the U.S. economy is experiencing a general price increase that is broader and more durable than Fed officials have assumed, and that the link to the pandemic is less obvious,” economist Andrew Howe According to Andrew Hollenhorst. Citigroup.
After the start of trading in the United States, the markets across the Atlantic also fell. The Stoxx 600 Index across Europe closed down 0.8%, and Frankfurt’s Dax Index fell 1.1%. The London FTSE 100 Index fell 0.2%.
Investors are waiting for announcements from three central banks this week on how they will balance rapid inflation with the spread of the Omicron coronavirus variant.
Some economists expect the Fed to announce on Wednesday that it plans to slow down its bond purchase program at a faster rate than it said at the meeting. last monthThis will lay the foundation for interest rates to rise from historical lows around the middle of next year.
“The possible outcome of the Federal Open Market Committee meeting on December 15 narrowed from a modest acceleration to a sharp acceleration reflecting severe inflation concerns, indicating that the pace of interest rate hikes has accelerated,” said Steven England of Standard Chartered Bank in New York.
“Our customer discussions have shown that market participants see a significant risk of sharply accelerating downsizing.”
Before the Fed, the yield to maturity of Treasury bonds rose, leading to a slight steepening of the yield curve. This is a slight counter-effect in the overall flattening trend that has continued since October. The benchmark 10-year bond yield rose by 0.03 percentage points to 1.44%. The two-year yield varies with interest rate expectations, rising by 0.02 percentage points to 0.66%.
In the UK, investors are betting that the rapid popularity of Omicron reduces the likelihood of the Bank of England tightening monetary policy at its Thursday meeting.
Investors will also pay close attention to the European Central Bank meeting scheduled for Thursday to find clues about how it will respond to rising inflation throughout the euro zone. Its 185 million euro bond purchase plan during the pandemic will stop net purchases in March.
The Eurozone inflation rate rose to 4.9% in November, exceeding the 4.5% average expected by economists surveyed by Reuters.
Georgina Taylor, fund manager of Invesco Emea, said that although the prices of energy, housing and food are rising in each region, the pressures on the three central banks are slightly different.
“Back to the financial crisis, everything is for [the banks] Very coordinated,” she said. “Now everyone is struggling with their own family difficulties, and they are all doing their own thing. “
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