Global index of stocks falls, yields rise

A global index of stocks fell on Friday while US Treasury yields rose after a July inflation reading showed prices rising slightly faster than expected, fuelling expectations the Federal Reserve will keep interest rates higher for longer.

The US producer price index (PPI) for final demand rose 0.3% in July, according to the Labour Department. This compared with economist expectations for 0.2%. And in the 12 months through July, the PPI rose 0.8% against estimates for 0.7%.

On Thursday, Wall Street’s main indexes had finished flat, giving up most early gains on milder-than-feared consumer price inflation data.

But also, on Friday a survey showed US consumer sentiment climbing to the highest level in nearly two years in July with calming inflation and a strong labour market boosting consumers.

While he saw the sentiment survey as good news for investors, John Augustine, Chief Investment Officer at Huntington National Bank, said the bond market’s reaction to the inflation data was causing a ripple effect in the stock market. Friday’s data suggested to Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute in St Louis, that the Fed will need to keep rates higher for longer and he said “it puts additional rate hikes back on the table for this year.”

Published in The Express Tribune, August 13^th, 2023.

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