Global stocks eased on Friday after Federal Reserve officials hinted U.S. interest rates may not fall any time soon, while commodities rallied on the back of optimism over a series of measures in China to stabilize its beleaguered property sector.
Data on Wednesday showed cooling US consumer price inflation, prompting markets to price in at least two rate cuts this year. But the excitement soon fizzled out as the latest report showed that the U.S. labor market remains tight, while central bankers remain cautious about inflation.
Equities are still heading for a gain this week, but have retreated since the U.S. inflation figures. Oil and gold have benefited from the evidence that price pressures have not worsened, while copper is set for its best weekly performance in two months as a shortage of material for immediate delivery has sent prices soaring.
Traders expect roughly two quarter-point cuts from the Fed this year, with November being the most likely starting point.
Despite inflation cooling first time this year, the Fed are sticking to that chorus of ‘rates need to stay here for some time, said City Index strategist Fiona Cincotta.
The MSCI All-World index was last down 0.1%, but still near this week’s record highs, while in Europe, the STOXX 600, which also hit a record peak this week, was down 0.4%.
This week’s data offered the Fed good news on two fronts, but policymakers have not openly shifted views yet about the timing of rate cuts that investors are convinced will start this year.
