Global stocks edge higher as investors weigh US inflation and Middle East risks

NEW YORK: Global equity markets edged higher on Wednesday as investors assessed stronger-than-expected US inflation data and awaited earnings from chipmaker Nvidia, while uncertainty surrounding the Middle East kept oil markets volatile.

MSCI’s gauge of global equities posted a marginal gain after US data showed annual inflation unexpectedly remained unchanged in July and stayed above the Federal Reserve’s 2% target for the 65th consecutive month.

Separate government figures showed that US consumer spending slowed modestly in July, while personal incomes increased at a faster pace than inflation.

The data added to investor caution over the outlook for US interest rates. On Wall Street, the three major stock indexes ended slightly lower after the inflation figures were released.

“The market has been looking for a reason to pull back a little bit,” said James Ragan, co-chief investment officer and director of investment management and research at D.A. Davidson.

Ragan said, however, that the latest data was unlikely to prompt the Federal Reserve to alter interest rates at its September meeting.

Investors were also awaiting Nvidia’s quarterly results, with the artificial intelligence-focused chipmaker’s earnings expected to provide a major test of the market’s enthusiasm for the AI sector.

Oil markets focus on Strait of Hormuz

Oil prices ended lower after fluctuating during the session as markets monitored developments surrounding the Strait of Hormuz, a critical route for global energy supplies.

A senior Iranian source said Iran and Oman were still working on the details of an arrangement concerning the waterway, contradicting an earlier statement by Iran’s Revolutionary Guards that the two countries had agreed on how to divide its use and revenues.

The Guards’ spokesperson also said the strait would not be reopened unless the United States met conditions set by Tehran.

The uncertainty over the waterway has kept energy markets on edge, with investors assessing the potential impact on global oil supplies and shipping.

Dollar rises, gold retreats

The dollar strengthened following the release of the US inflation data, while gold slipped from a three-month high as investors adjusted their expectations for interest rates.

Markets remained cautious ahead of Nvidia’s results and continued to monitor developments in the Middle East, leaving investors balancing corporate earnings prospects against inflation and geopolitical risks.

“The economy still looks pretty good. I wouldn’t say there’s anything in there that says the economy has accelerated so it’s kind of more of the same,” Ragan said.

Besides the data, Ragan pointed to Nvidia’s NVDA.O earnings report due out after U.S. markets close, as a major focus for investors on Wednesday. Along with the chip maker’s second-quarter numbers and financial guidance, he said they will be keenly focused on the company’s commentary on financing of the AI spending boom.

The Dow Jones Industrial Average .DJI fell 113.52 points, or 0.21%, to 53,463.88, the S&P 500 .SPX fell 1.58 points, or 0.02%, to 7,675.70 and the Nasdaq Composite .IXIC fell 21.10 points, or 0.08%, to 26,130.20.

MSCI’s gauge of stocks across the globe .MIWD00000PUS rose 0.45 points, or 0.04%, to 1,150.06. Earlier, the pan-European STOXX 600. STOXX index finished close to flat, down 0.01%.

Trading in energy markets was choppy as investors monitored talks between Iran and Oman on the Strait of Hormuz and assessed a smaller-than-expected rise in U.S. crude stocks.

U.S. crude CLc1 settled down 0.16%, or 13 cents, at $82.23 a barrel while Brent LCOc1 settled at $87.84 per barrel, down 0.84%, or 74 cents.

Oil’s fluctuations also appeared to affect the bond market. U.S. Treasury yields edged higher after the inflation data while traders also monitored Middle East developments and weighed U.S. government plans to expand debt buybacks.

The yield on benchmark U.S. 10-year notes US10YT=RR rose 0.75 basis points to 4.647%, from 4.639% late on Tuesday while the 30-year bond US30YT=RR yield fell 0.58 basis points to 5.1682%.

The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 0.74 basis points to 4.211%.

Odds that rates would stay steady rose to roughly 64% from 60.4% on Tuesday, while bets for a 25 basis point interest rate hike in September dropped to 36% from almost 40% the day before, according to CME Group’s FedWatch Tool. However, rates are still expected to rise by year-end.

In currencies, the dollar was higher after the economic data slightly increased expectations among some investors for a rate hike.

The dollar index=USD, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.24% to 99.15, with the euro EUR= down 0.18% at $1.1653.

Against the Japanese yen JPY=, the dollar strengthened 0.12% to 159.35.

In precious metals, gold prices were lower after hitting their highest levels since mid-May on Tuesday.

Spot gold XAU= fell 1.32% to $4,595.33 an ounce. U.S. gold futures GCc1 fell 0.65% to $4,607.80 an ounce.