Global stocks rise, dollar dips as focus shifts to US inflation data
While the US consumer prices report will likely take centre stage, US producer price data is also due this week, along with final reports on European inflation that should reinforce expectations for a June rate cut
Global stock indexes rose on Monday while the US dollar edged lower, with investors awaiting this week’s US inflation data that is expected to be key for the outlook for US interest rates.
While the US consumer prices report will likely take center stage, US producer price data is also due this week, along with final reports on European inflation that should reinforce expectations for a June rate cut from the European Central Bank.
Reports on Chinese retail sales and industrial output are expected as well.
This week brings comments from a host of Federal Reserve speakers, including Fed Chair Jerome Powell.
Investors have been focused on inflation as they weigh how soon the U.S. central bank is likely to cut rates.
Economists polled by Reuters expect the closely watched core CPI to rise by 0.3% in the month, down from 0.4% in March, for an annual gain of 3.6%, down from 3.8%.
Investors need to “get some level of comfort that inflation is not going back up, and potentially going down, to give the Fed cover for at least one or maybe two cuts before the end of the year,” said Thomas Hayes, chairman at Great Hill Capital LLC.
The Dow Jones Industrial Average rose 98.29 points, or 0.25%, to 39,611.13, the S&P 500 gained 5.65 points, or 0.11%, to 5,228.33 and the Nasdaq
Composite gained 30.04 points, or 0.18%, to 16,370.91.
The first-quarter US earnings season is winding down, but investors will see reports this week from some big US retailers including Walmart.
MSCI’S gauge of stocks across the globe rose 1.54 points, or 0.20%, to 783.60, and the STOXX 600 index was nearly flat.
Earlier in the day, Chinese stocks eased. China’s finance ministry said on Monday it will start the long-awaited sales of 1 trillion yuan ($138.23 billion) of long-term treasury bonds that Beijing hopes will help stimulate key sectors of a flagging economy this week.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.18% to 105.14.
The relative outperformance of the US economy continues to underpin the dollar, while only the threat of Japanese intervention is stopping it from re-testing the 160 yen barrier.
The Bank of Japan on Monday sent a hawkish signal to markets by cutting the amount of Japanese government bonds it offered to buy in a regular operation.
Against the Japanese yen, the dollar was up 0.1% at 155.90, after touching its highest level since May 2 at 155.965, and the euro was up 0.3% at $1.0803.
Benchmark 10-year note yields were last down 3 basis points at 4.615%. US crude gained 1.11% to $79.13 a barrel and Brent rose to $83.51 per barrel, up 0.87% on the day. Spot gold lost 0.77% to $2,342.20 an ounce.
Meanwhile, a federal fraud trial began Monday for the owner and chief financial officer of a hedge fund that collapsed when it defaulted on margin calls, costing leading global investment banks and brokerages billions of dollars.
Bill Hwang, the founder of Archegos Capital Management, and his former CFO Patrick Halligan, are being tried together.
Their scheme involved secret trading in stock derivatives that made their private investment fund “a house of cards, built on manipulation and lies,” Assistant U.S. Attorney Alexandra Rothman told jurors.
“These two men made fraud their business,” Rothman said. “All because the defendant, Bill Hwang, wanted to be a legend on Wall Street.”
Prosecutors have accused Hwang of lying to banks to get billions of dollars that his New Yorkbased private investment firm then used to inflate the stock price of publicly traded companies and grow its portfolio from $10 billion to $160 billion.
The indictment said that Hwang led market participants to believe the prices of stocks in the fund’s portfolio were the product of natural forces of supply and demand, when in reality, they resulted from manipulative trading and deceptive conduct that caused others to trade. Hwang and Halligan pleaded not guilty, while the head trader for Archegos and its chief risk officer have pleaded guilty and are cooperating with prosecutors.
According to the indictment, Hwang first invested his personal fortune, which grew from $1.5 billion to over $35 billion, and later borrowed funds from major banks and brokerages, vastly expanding the scheme.
The alleged fraud began as Hwang worked remotely during the coronavirus pandemic in the spring of 2020. Covid-related market losses prompted Hwang to reduce or sell many of Archegos’s previous investment positions, so he “began to build extraordinarily large positions in a handful of securities,” the indictment said.
The indictment said the investment public did not know Archegos had come to dominate the trading and stock ownership of multiple companies because it used derivative securities that had no public disclosure requirement to build its positions.
At one point, Hwang and his firm secretly controlled over 50 percent of the shares of Viacomcbs, prosecutors said.
But the risky maneuvers made the firm’s portfolio highly vulnerable to price fluctuations in a handful of stocks, leading to margin calls in late March 2021 that wiped out more than $100 million in market value in days, the indictment said.