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Wall Street stocks stabilized as traders assessed data showing China’s economy on the brink of deflation and braced for US inflation figures that will fuel the Federal Reserve’s interest rate decision. interest at the end of July.
The blue-chip S&P 500 rose 0.1% in afternoon trade in New York on Monday, after swinging between gains and losses early in the day following a three-game losing streak. The tech-heavy Nasdaq Composite was flat.
The KBW Bank index rose 0.2% even as the main US banking regulator stricter capital rules proposed for the largest lenders in the country.
The US measures came after data from the Bureau of Labor Statistics on Friday showed the world’s largest economy added 209,000 jobs in June.
The jobs report beat expectations for the first time in 15 months, but left some traders “confused”, said Mike Zigmont, head of trading and research at Harvest Volatility Management. “Is it strong enough for the (Federal Reserve) to keep hiking? Is it weak enough to keep the Fed on hold? Is it so weak compared to the strong months of the past few months that we are looking at an impending recession? »
JPMorgan analysts said the “still tight” labor market “paves the way” for another Fed rate hike later this month. After that, expect an “extended hold” from the central bank as economic growth slows, reducing the need for further monetary tightening.
Investors’ attention this week will be focused on the US consumer price index, which is expected to have slowed in June, potentially easing pressure on the central bank to start raising rates again at its July meeting. .
If headline year-on-year inflation fell to 3.1% in June as expected, it would mark the lowest rate since March 2021.
“The United States is expected to report a sharp decline in both headline and core inflation measures during the month of June,” said Karl Schamotta, chief market strategist at Corpay. “But with falling used-car prices and seasonal adjustments playing an outsized role, the data is unlikely to derail the Federal Reserve.”
The policy-sensitive two-year US Treasury yield fell 0.07 percentage points to 4.87%. Its yield, which moves inversely to the price, reached a Top 16 up more than 5% last week after strong private payroll data.
At the other end of the inflation spectrum, Chinese data released on Monday showed the world’s second-largest economy teetering on the edge of deflation. The country’s consumer price index fell 0.2% month-on-month as factory gate prices fell at the fastest pace in seven years as demand for consumer and manufactured goods declined.
China’s “slip into the world of deflation” has increased the need for economic stimulus, including tax relief and investment in strategic sectors, said Rabobank analyst Michael Every. But “due to current debt levels and the ongoing housing crisis, we do not anticipate meaningful economic stimulus.”
Sluggish price growth will only heighten investor concerns about China’s faltering recovery this year. Many had tipped China back to life after strict zero-Covid measures were scrapped at the end of 2022.
Oil prices fell after the outlook for one of the world’s biggest energy consumers dimmed. Brent crude, the international benchmark, fell 1% on Monday afternoon to trade at $77.70 a barrel while US marker West Texas Intermediate fell 1.2% to $72.98 a barrel .
Major Asian markets closed in positive territory after the Chinese data, with Hong Kong’s Hang Seng index up 0.6% and China’s CSI 300 up 0.5%.
In Europe, the regional Stoxx 600 gained 0.2%, while the French Cac 40 rose 0.4%. The German Dax gained 0.4%, after falling in early trading. London’s FTSE 100 rose 0.2%.
