There are signs that U.S. inflation is stabilizing, bonds are rising, and bank stocks are falling

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Newsletter: Not hedged

U.S. government bonds rose while bank stocks weighed on major stock markets on Tuesday, as the slowdown in U.S. inflation made investors think U.S. Federal Reserve There will be more time to cancel the stimulus measures during the crisis.

Data released on Tuesday shows the title U.S. consumer prices It rose 5.3% in the year to August, slightly lower than the 5.4% inflation rate recorded in July.

The yield on the benchmark 10-year US Treasury note, which is inversely proportional to price, fell 0.05 percentage points to 1.28%, earlier hitting its lowest level in more than a week. The yield on the two-year US Treasury note, which is highly sensitive to future interest rate expectations, also fell, falling by 0.01 percentage point to 0.21%.

The S&P 500 index closed down 0.6% during the New York session, and the financial sector was the worst performing sector in the blue chip index. The technology-focused Nasdaq Composite Index fell 0.4%.

Federal Reserve Chairman Jay Powell argued that the increase in inflation was caused by temporary factors related to the pandemic, such as Transport interruption And the rise in used car prices related to the shortage of computer chips.

After the official data was released, traders’ long-term inflation expectations fell slightly. The data showed that consumer prices in August rose 0.3% from July. The five-year break-even inflation rate, which measures five-year inflation expectations, fell from 2.57% yesterday to 2.52% after the morning price data was released, the lowest level since September 3.

“We will definitely see a trend of inflation becoming less severe,” said Zehrid Osmani, Martin Currie’s global portfolio trust manager. “Inflationary pressures will begin to fade at the end of this year.”

An analyst at TD Securities added: “The easing of inflation has made the Fed’s tightening policy less urgent.”

However, some investors still worry that US consumer price growth is still at a high level. As economic growth rebounds from the 2020 lows and stabilizes, this may lead to stagflation.

“I tend to have inflation become more persistent,” said Kasper Elmgreen, Amundi’s head of stocks, who mentioned that wage increases were due to the difficulty of US employers to fill job vacancies. “Then we will enter a stagflation environment.”

A survey conducted by Bank of America of 258 asset management companies found that a net 13% of respondents expect global economic growth to rise, the lowest level since April 2020. But half of the respondents still believe that the stock market will go higher.

“Growth expectations indicate that stock allocation should decline,” Bank of America strategists wrote in a report accompanying the survey.

On the other side of the Atlantic, the Stoxx Europe 600 index of the entire European continent closed basically flat, while the German Dax index closed up 0.1%. Britain’s FTSE 100 index closed down 0.5%.

In Asia, Hong Kong’s Hang Seng Index fell sharply for the second consecutive day, closing down 1.2%, and China’s Shanghai and Shenzhen 300 Index fell 1.5%. However, Japan’s Nikkei 225 average index rose 0.7% to its highest level since 1990.

Brent crude oil, the oil benchmark, closed up 0.1% to $73.60 per barrel, ending two consecutive trading days of strong gains.

The U.S. dollar index, which measures the U.S. dollar against six other currencies, was almost unchanged on Tuesday. The British pound fell 0.2% to US$1.381 against the US dollar, while the euro fell less than 0.1% to US$1.181 against the US dollar.

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