Wall Street declines ahead of US data; dollar faces heat from yen, yuan | News on Markets

Stock markets took a breather on Monday from their record highs of recent sessions as investors looked to an abbreviated trading week, capped by key US inflation data on Friday, due to the impending Easter holiday.

Wall Street’s main indices kicked off the week on a lower note. Market participants are hoping that Friday’s US prices data will back investor bets for a June interest rate cut by the Federal Reserve.

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Boeing Co was a focus on Wall Street after the planemaker said its CEO Dave Calhoun would step down by year-end amid a sprawling safety crisis.

Oil benchmark Brent hovered close to $86 a barrel as hostilities intensified in the Middle East, and between Russia and Ukraine, with energy infrastructure targeted in the two-year-old war.

The dollar slipped, with the threat of currency intervention from Japanese authorities and a government-driven rally in China’s yuan weighing on the US currency.

The yen was within striking distance of a 32-year low as Japan’s top currency diplomat said on Monday the unit’s weakness did not reflect fundamentals.

The MSCI All Country stock index was down 0.1 per cent, although still only about 5 points below its all-time high of last Thursday.

In Europe, the STOXX index of 600 companies was a touch weaker at 508.10 points after hitting a lifetime high of 510.46 points on Friday. Goldman Sachs raised its 2024 target for the benchmark to 540 from 510, citing potential improvement in economic growth and rate cuts.

US stock indices also hit record highs last week, with the S&P 500 on Friday ending with its biggest weekly percentage gain of 2024 after the US Federal Reserve stuck with projections for three rate cuts by year’s end.

Jason Da Silva, director of global investment strategy at Arbuthnot Latham, said the Fed’s comments gave markets some comfort, and Monday’s signs of consolidation in stocks should not be surprising after the momentum seen so far this year.

US inflation data

The main data event of the week will be the US core personal consumption expenditure (PCE) price index on Friday, which is seen rising 0.3 per cent in February, keeping the annual pace at 2.8 per cent. Analysts say that anything higher would be taken as a setback to bets for a Fed rate cut in June.

Many markets are closed for the Easter break on Friday, when the PCE data is due for release, so the full reaction may not come until next week.

Fed Chair Jerome Powell was sufficiently dovish last week to leave futures implying around a 74 per cent chance of a June easing, up from 55 per cent a week earlier.

Powell will participate in a moderated discussion at a policy conference on Friday, while Fed governors Lisa Cook and Christopher Waller are also appearing this week.

Europe has its own inflation tests with consumer price data out from France, Italy, Belgium and Spain, ahead of the overall EU CPI report on April 3.

Sweden’s central bank meets on Wednesday and is generally expected to keep rates at 4.0 per cent.

In Asia, Japan’s Nikkei dipped 1.1 per cent, having spiked 5.6 per cent last week to a fresh all-time peak as the yen weakened.

Even a shift away from super-easy policies by the Bank of Japan (BOJ) could not dent the dollar, as investors assumed it was not the start of a series of hikes and futures imply a rate of just 20 basis points by yearend.

The dollar was at 151.22 yen, having climbed 1.6 per cent last week to a peak of 151.86. Markets are wary of testing 152.00, a level that has drawn Japanese intervention in the past.

The euro was at $1.0831, having been dragged down in the wake of the Swiss franc after the SNB’s rate cut.

The strength of the dollar had taken some shine off gold, although the metal was edging higher again to $2.174 an ounce, after hitting a record peak last week.

Oil prices were underpinned by Ukraine’s attacks on Russian refineries, along with data showing a fall in US rig counts.

Brent rose 0.3 per cent to $85.74 a barrel, while US crude firmed 0.4 per cent to $80.98 per barrel. Both benchmarks have risen steadily this year, up between 11 and 12.5 per cent by Friday’s close.