NEW YORK: US and European stock markets mostly dropped Thursday as the latest bout of economic indicators appeared to dent expectations the Federal Reserve might soon slash interest rates.
Earlier, Paris had struck an all-time peak above 8,200 points and Frankfurt reached a new summit past 18,000, but both stocks were later pulled down by Wall Street, with Paris ending only slightly higher and Frankfurt closing with a loss.
Kathleen Brooks, research director at XTB, said that US producer price data surprised on the upside, which is intensifying fears that inflation pressures are building, and central banks may not be able to slash interest rates as fast as predicted.
US shares had reached record highs Monday, but have largely churned sideways this week as investors digested a mixed bag of economic reports ahead of an important Fed meeting next week.
The US reported Thursday that retail sales bounced 0.6% in February, but that came after a steep slide in January, and taken together the numbers did not suggest an overly hot economy.
More worryingly, US producer prices rose 0.6% last month, above analyst expectations. That report followed news earlier in the week that consumer rates had also went up unexpectedly.
Charles Schwab analyst Joe Mazzola said that with less than a week until the next Federal Reserve meeting, data early Thursday reinforced ideas that inflation remains hotter than the central bank might like.
The US Fed meets Tuesday and Wednesday, though most investors do not expect it to begin lowering interest rates until its June meeting.
US Steel shares closed 6.4% down after President Joe Biden, as expected, said he opposed its sale to Japan’s Nippon Steel.
European Central Bank statement’s effect
In Europe, rates were initially went up after recent comments from the European Central Bank seemed to lead investors to also price in a rate slash in June. But the hesitant mood on Wall Street soon carried across the Atlantic, and shares dropped back.
Elsewhere, bitcoin hit a fresh record high at 73,797 dollars before losing gains, and oil reached its highest levels since November.
Oil rates were boosted by International Energy Agency (IAE) forecasts that demand would grow higher than expected, combined with reports earlier this week that United States stockpiles have fallen.
