Another surge in inflation in the US is stoking investor concerns about higher interest rates and a collapsing economy. The US indices lost a lot of feathers after the latest figures were announced, but they recovered somewhat over the course of the day. Airline stocks are under pressure.
Share prices on Wall Street ended trading slightly lighter, but clearly recovered from their daily lows on Wednesday. The shock of the unexpectedly sharp rise in consumer prices quickly subsided. The market has been speculating that the June price hikes may indeed have peaked and will taper off thereafter. Reference was made to the recent significant drop in oil prices. Wages are also increasing more slowly, it said. The annual inflation rate of consumer prices had initially frightened. An increase to 8.8 after 8.6 percent was expected, but inflation in the USA actually reached a value of 9.1 percent. This was the first time since 1981 that there was a 9 before the decimal point. The core rate was also above forecast.
The Dow Jones index ended trading 0.7 percent lower. The S
Even marginally higher inflation figures would have underpinned the prospect of a brisk pace on the part of the US central bank in fighting inflation. Now the readings may even point to an even tighter monetary policy from the Fed. In view of this prospect, fears of a recession on the stock market are increasing, because the hoped-for "soft landing" of the economy is becoming increasingly unlikely. "There should be little doubt that key interest rates will be increased by 75 basis points this month," it says in the trade. However, the camp of those who even expect an interest rate hike of 100 basis points is growing: if such a step was priced in at 7.6 percent on Tuesday, it was already 42 percent on Wednesday.
With interest rate expectations rising, the banking sector lost 1.4 percent, although higher interest rates are benefiting the institutes' business model. But fears of a recession are now outweighing it, it said. Among individual stocks, Delta Airlines fell 4.5 percent. The airline missed market expectations on the profit side in the second quarter. However, sales beat forecasts and came in above pre-pandemic levels. The course of the industrial supplier Fastenal fell by 6.4 percent. Although dealers spoke of solid second-quarter figures, the sales development was disappointing. In addition, market participants feared a bleak demand trend due to high inflation.
After an interim rise, the dollar bounced back slightly, despite growing speculation about interest rates. The dollar index fell 0.1 percent, but remained at a 20-year high. The euro recovered slightly. The Canadian dollar, meanwhile, appreciated against its US counterpart. While there has only been speculation about a 100 basis point interest rate hike by the US Federal Reserve, the Bank of Canada already took this step on Wednesday. The Canadian dollar was trading at just over US$0.77 in late trade. The daily low before the interest rate decision was 0.7658.
Recession worries dominated the bond market, which was reflected in a clearly inverted yield curve. The fears of a recession associated with interest rate speculation did not put a lasting brake on oil prices. Because these had already started a rapid descent on Tuesday, with the prices for the WTI and Brent grades falling below $100 a barrel, so that there was now a small countermovement. WTI was up 0.5 percent at settlement and Brent was up 0.1 percent. The significantly increased oil reserves in the USA are no longer a burden either.
Gold prices, meanwhile, recovered as the dollar weakened slightly. The precious metal was probably sought after against the background of the uncertain economic prospects.
