US stocks rise on tame inflation data

Reuters NEW YORK | Updated on March 13, 2019 Published on March 13, 2019

A gauge of world equity markets rose and the dollar eased on Tuesday after a tame reading on US inflation reinforced expectations the Federal Reserve will not raise interest rates anytime soon, while Boeing shares slid for a second day.

US consumer prices rose for the first time in four months in February but the modest pace of the increase resulted in the smallest annual gain in inflation in nearly two and a half years. In the 12 months through February, the CPI rose 1.5 per cent, well under the Fed's target of 2 per cent, leading the dollar to slip against the euro and the dollar index of leading US trading partners' currencies to fall. Gold gained on the weaker greenback.

“The takeaway from the data was that inflation is in check and that would allow the Fed to remain patient and that is always good for equities,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance in Charlotte, North Carolina.

Candice Bangsund, part of the Global Asset Allocation team at Fiera Capital in Montreal, said it was premature to rule out further central bank tightening this year and that those who see a rate cut as the Fed's next move were overly pessimistic. “While we don't see inflation coming back in an aggressive manner, we do see inflation slowly accelerating,” she said.

Boeing Co slumped 6.13 per cent to extend Monday's losses as more countries, including all of the European Union, grounded the company's 737 MAX planes following a second fatal crash of a MAX 8 jetliner in five months.

Rival airplane manufacturer Airbus SE was the biggest contributor to advancing shares in the FTSEurofirst 300 of leading European shares, rising 1.43 per cent. But the index edged lower as investors awaited a Brexit vote.

Britain's parliament late Tuesday rejected Prime Minister Theresa May's deal to quit the EU for a second time, deepening the country's worst political crisis in generations, a scant 17 days before the planned departure date. Sterling fell in volatile trading, down 2 per cent to $1.3006 at one point. The pound later recouped some losses to trade 0.59 per cent lower at $1.3076 after the vote.

MSCI's all-country world index of equity performance in 47 countries rose 0.49 per cent, while the pan-European STOXX 600 index lost 0.06 per cent.

On Wall Street, the S&P 500 gained 8.22 points, or 0.30 per cent, to 2,791.52 and the Nasdaq Composite added 32.97 points, or 0.44 per cent, to 7,591.03. The Dow Jones Industrial Average fell 96.22 points, or 0.38 per cent, to 25,554.66, dragged lower by slumping Boeing.

Investors have been too bearish on the economy, Bangsund said, adding that Fiera Capital had gone overweight on equities in expectations of a successful US-China trade accord and a stabilized Chinese economy, which would help spur global growth.

Published on March 13, 2019
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