People walk by New York Stock Exchange in the financial district in New York, US. -Reuters
Wall Street put a floor under global equities on Friday after a weak inflation reading brought investors back into US stocks even as tensions between the United States and North Korea continued to escalate, though the geopolitical fears still drove safe-haven buying of gold and the yen.Wall Street put a floor under global equities on Friday after a weak inflation reading brought investors back into U.S. stocks even as tensions between the United States and North Korea continued to escalate, though that tension still drove safe-haven buying of gold and the yen.
A small rise in a measure of U.S. consumer prices pointed to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year, which would be favourable to equity investors. The hope that the Fed will have to slow its rate-hike path appeared to stop, at least for now, the near $1-trillion loss in world stocks valuations this week triggered by the war of words between Pyongyang and Washington.
"The slight bias to the upside (in stocks) is a result of the CPI number. The market is interpreting it as lowering the odds of the Fed raising rates in December," said Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta. Reuters data show a 22 percent perceived chance for a rate hike after the Fed's December meeting. Japanese markets were closed for a holiday, but the tense mood dragged Asian shares lower and an MSCI index of stocks across the globe posted its largest weekly drop since the week before Donald Trump won the US presidential election in November.
Trump issued a new warning to Pyongyang on Friday, saying in a tweet: "Military solutions are now fully in place, locked and loaded, should North Korea act unwisely." North Korea had responded to Trump's previous promise to unleash "fire and fury" with a threat to land missiles near the US Pacific territory of Guam.
The Dow and S&P 500 inched higher on the day but they both posted their largest weekly percentage drops since late March. "There's not a great incentive to buy big," said Lerner of SunTrust Advisory. "You're less than 2 percent off the high for the S&P heading into a weekend where uncertainty with North Korea still lingers."
The Dow Jones Industrial Average .DJI rose 14.31 points, or 0.07 percent, to end at 21,858.32, the S&P 500 gained 3.11 points, or 0.13 percent, to 2,441.32 and the Nasdaq Composite .IXIC added 39.68 points, or 0.64 percent, to 6,256.56.
The pan-European FTSEurofirst 300 index lost 1.01 percent and MSCI's gauge of stocks across the globe shed 0.26 percent for a weekly loss of 1.6 percent, the largest since the week to Nov. 4. Emerging market stocks .MSCIEF lost 1.27 percent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.47 percent lower.
-Reuters, New York
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