STOCK markets wavered yesterday after US data showed bigger-than-expected rise in wholesale inflation and traders weighed the likelihood of more interest-rate hikes this year.

Wholesale prices in the United States picked up in July on a surge in services costs, according to government data released yesterday.

The US markets ended the day mixed, with the tech-rich Nasdaq Composite Index falling 0.6% to end the week at 13,644.85.

While producer prices have come down rapidly since last year, progress has been slower in consumer inflation, leading to a mixed reaction in the financial markets. 

“We had inflation data which came in higher than expected but the market was caught off guard because yesterday’s (consumer) inflation data came in lower than expected,” Adam Sarhan of 50 Park Investments told AFP. 

“So the market likes certainty and right now we are getting a lot of uncertainty with respect to inflation,” he added. 

European stocks ended the trading week firmly in the red, as did the Hang Seng and Shanghai composite indexes. 

‘On track for soft-landing’

In Britain, better-than-expected growth data yesterday increased the likelihood of more interest rates tightening by the Bank of England, briefly boosting the pound.

Gross domestic product grew 0.2% in the April to June period thanks to strong output in June and despite inflation remaining high, the Office for National Statistics said in a statement.

“Today’s GDP data helps build on the idea that the UK could be on track for a soft-landing akin to that currently being seen in the US,” Joshua Mahony, chief market analyst at Scope Markets, said.

“However, that soft-landing narrative also brings with it the potential for a more protracted period of tightening, with the Bank of England under no pressure to ease off on its current path of higher interest rates.”

In the United States, consumer prices rose last month but by less than analysts expected, giving the Fed room to take a lighter touch with monetary policy after more than a year of rate hikes.

While there is a broad expectation that policymakers will hold off on lifting borrowing costs at next month’s meeting, analysts say additional rate hikes this year are still on the table. 

“The (inflation) data… keeps alive the possibility of a further possible hike later in the year given the tightness in the labour market,” said National Australia Bank’s Tapas Strickland.

In Asian stock market trading, Hong Kong extended the week’s losses yesterday, even as e-commerce titan Alibaba surged on a forecast-busting rise in revenue.

Tokyo was closed for a holiday.

Oil prices rose as the International Energy Agency hiked its forecast for global oil demand growth this year despite weakness in the Chinese economy.

“Oil prices have risen more than 20% since late June, buoyed by the actions of Opec+ and the unilateral additional cuts by Saudi Arabia and Russia, both of which have been extended to September,” Craig Erlam, senior market analyst at Oanda said in a statement.

Key figures around 2045 GMT

New York - Dow: UP 0.3% at 35,281.40 (close)

New York - S&P 500: DOWN 0.1% at 4,464.05 (close) 

New York - Nasdaq: DOWN 0.6% at 13,644.85 

London - FTSE 100: DOWN 1.2% at 7,524.16 points (close)

Frankfurt - DAX: DOWN 1.0% at 15,832.17 (close) 

Paris - CAC 40: DOWN 1.3% at 7,340.19   (close)

EURO STOXX 50: DOWN 1.4% at 4,321.33 (close)  

Hong Kong - Hang Seng Index: DOWN 0.9% at 19,075.19 (close)

Shanghai - Composite: DOWN 2.0% at 3,189.25 (close)

Tokyo - Nikkei 225: Closed for a holiday

Euro/dollar: DOWN at US$1.0952 from US$1.0983 on Thursday

Pound/dollar: UP at US$1.2699 from US$1.2676 

Euro/pound: DOWN at 86.20 from 86.62 pence 

Dollar/yen: UP at  ¥144.93 from  ¥144.77

Brent North Sea crude: UP 0.5% at US$86.81 per barrel

West Texas Intermediate: UP 0.4% at US$83.19 per barrel – AFP, August 12, 2023.