Despite the welcome decline in US gasoline prices, food, housing and car prices continued to rise
New York (AFP) – Stock markets fell while the dollar rose on Tuesday after data showed that inflation in the United States remained high and broad-based.
Wall Street stocks fell, with the Dow losing nearly 1,300 points and the Standard & Poor’s index falling 4.3 percent, after the hotter-than-expected report, which is closely watched by the Federal Reserve as it prepares for its next interest rate decision next week.
Stocks have rebounded in recent days as investors clung to hope that slowing price increases would allow the Federal Reserve to eventually back off from its tough fight against inflation, but the data dashed those hopes for now.
While the annual increase in the Consumer Price Index (CPI) slowed slightly in August to 8.3 percent, monthly inflation actually rose by 0.1 percent compared to July, the Labor Department said, a disappointing result amid widespread expectations of a lower CPI. In month.
Most alarming, the report showed that, excluding volatile food and energy prices, the “core” CPI accelerated sharply in August, rising 6.3 percent over the past 12 months, after the 5.9 percent pace in July and June.
Despite the welcome relief from lower gasoline prices, costs for food, housing, and medical care continued to rise.
The dollar, which had fallen against its main rivals, rose in anticipation of slowing inflation.
“Today was a crazy day,” said Greg Pasock of AXS Investments, adding that the stock slump was “more than just a one-time overreaction.”
“I think part of the strong reaction today is based on greater concern among market investors about … the extent to which higher prices are creeping into areas that were less expected,” he told AFP.
Gains in Europe quickly turned into losses after US inflation data.
Fed Chairman Jerome Powell has made clear that increases in the benchmark lending rate will continue until inflation is tamed.
Economists say the data confirms that the Fed will announce a third consecutive increase of three quarters next week, ending a slight possibility that central bankers will choose a more modest 0.5 point increase.
Market analyst Michael Hewson said core inflation numbers mean more sharp price increases are needed to tame the higher prices.
“While the narrative of peak inflation may still be correct, lowering it from these levels is likely to be an even more difficult battle,” he said.
Inflation has risen worldwide this year due to rising energy and food bills.
This has resulted in large part from supply constraints after economies reopened from pandemic lockdowns and in the wake of the Russian invasion of Ukraine.
The dollar rose as the Federal Reserve moved earlier and more aggressively than other central banks to raise interest rates and contain inflation.
– Key numbers around 2100 GMT –
New York – Dow: down 3.9 percent to 31104.97 (close)
New York – Standard & Poor’s 500: down 4.3 percent at 3,932.69 (close)
New York – Nasdaq: down 5.2 percent at 11633.57 (close)
EURO STOXX 50: down 1.7% at 3586.18
London – FTSE 100: down 1.2 per cent at 7,385.86 (close)
Frankfurt – DAX: down 1.6 percent at 13188.95 (close)
Paris – CAC 40: down 1.4 percent at 6245.69 (close)
TOKYO – Nikkei 225 index: up 0.3 percent to 28614.63 (close)
Hong Kong – Hang Seng Index: down 0.2 percent at 19,326.86 (close)
Shanghai – Composite: up 0.1 per cent at 3,263.80 (close)
EUR/USD: down at $0.9974 from $1.0120
Pound/dollar: down at $1.1500 from $1.1680
Euro / Pound: up to 86.74 pence from 86.64 pence
Dollar / yen: rose to 144.43 yen from 142.82 yen
Brent North Sea crude: down 0.9 percent at $9,317 a barrel
West Texas Intermediate: down 0.5 percent at $87.31 a barrel
burs-rl / imm / hs / st