NEW YORK, June 10 (Reuters) – US equities futures turned negative and European equities fell further on Friday after higher-than-expected US consumer price data May fueled inflation concerns and likely kept the Federal Reserve on track to aggressively raise interest rates.
The consumer price index rose 1.0% last month after gaining 0.3% in April, the Labor Department said. Economists polled by Reuters had predicted that the monthly CPI would rise by 0.7%. L1N2XW25Z
Some economists and market participants expected the data to show that inflation had peaked in May, but the report said otherwise.
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“It was quite hot. This report suggests that the underlying inflationary pressures remain quite strong,” said Aichi Amemiya, chief US economist at Nomura.
U.S. two-year Treasury bond yields rose to a three-and-a-half-year high and part of the yield curve was reinvested following data showing accelerating consumer prices.
Traders are trading on the New York Stock Exchange (NYSE) in New York City, USA, January 10, 2022. REUTERS / Brendan McDermid / File Photo
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US equities futures fell more than 1% and major European stock markets widened falls after the release of the data, with France’s CAC 40 (.FCHI) up 2.0%, DAX (.GDAXI) in Germany 1.88% and FTSE 100 (.FTSE) in London 1.73% less.
The Pan-European STOXX 600 Index (.STOXX) fell 2.04% and the MSCI Worldwide Value Indicator (.MIWD00000PUS) fell 0.78%.
Investors expect Fed to raise interest rates by 50 basis points next week as major central banks tighten policy to control rising inflation caused by rising crude oil and food prices, together with supply chain problems.
“We don’t see any possibility of raising the 75 basis points next week,” Amemiya said, but the likelihood of rising more than 50 basis points has increased.
The Band of England and the Swedish Riksbank are expected to raise rates again next week, while the European Central Bank said on Thursday it would make its first rate hike since 2011 next month, followed by a potentially bigger move in September. Read more
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Herbert Lash Report; Editing by Chizu Nomiyama
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