By Sinéad Carew
NEW YORK (Reuters) -Global stocks rose on Wednesday with U.S. Treasury yields as relief over cooler U.S. inflation in February was countered by uncertainty around U.S. President Donald Trump’s tariff policies and their potential impact on inflation and global growth.
Oil prices settled higher after data on slower stockpile builds, while the euro pulled back slightly after hitting a five-month high in the previous day’s session on hopes for a ceasefire between Ukraine and Russia.
Wednesday’s U.S. Department of Labor data showed the Consumer Price Index rose 2.8% on an annual basis in February, below the 2.9% forecast from economists polled by Reuters. On a monthly basis, it rose 0.2% after accelerating 0.5% in January and versus economists’ estimate of 0.3%.
The S&P 500 opened higher but then lost steam in morning trading. It returned to positive territory before midday and stayed there for the rest of the session.
“It’s maybe some liquidity coming back into the market,” said Paul Christopher, head of global market investment strategy for Wells Fargo Investment Institute in St. Louis, Missouri.
“What we’re seeing is some money coming back in buying the dip. That’s a good sign.”
While investors were relieved that inflation was lower than expectations, Christopher said that strength in services price increases also showed that the economy was still solid.
On Wall Street the Dow Jones Industrial Average fell 82.55 points, or 0.20%, to 41,350.93, the S&P 500 rose 27.23 points, or 0.49%, to 5,599.30 and the Nasdaq Composite rose 212.36 points, or 1.22%, to 17,648.45.
But investors were still wary of U.S. trade policy and the impact that could have on inflation going forward.
“Today’s inflation report is obviously good news but it’s also backward-looking and doesn’t tell us anything about where we’re headed from here and what the inflationary impact of all these tariffs might be,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
Investors had to scramble to keep up with events on Tuesday after Trump threatened to double steel and aluminium tariffs on Canada to 50%, then reversed course later in the day.
“The hard part is the uncertainty around tariffs,” said Baird. “It’s one thing to understand that the rules of the game are changing, but understanding what those rules will be and when they’ll be clearly defined is another thing entirely.”
Trump threatened on Wednesday to escalate a global trade war with further tariffs on European Union goods
This was after the European Commission said Europe would impose counter tariffs on 26 billion euros’ ($28 billion) worth of U.S. goods, including dental floss, diamonds, bathrobes and bourbon. Europe’s threat came after Trump’s 25% tariffs on all steel and aluminium imports took effect on Wednesday.
MSCI’s gauge of stocks across the globe rose 4.08 points, or 0.49%, to 830.72 after rising earlier to 834.73
The pan-European STOXX 600 index earlier closed up 0.81% after four straight sessions of declines on optimism around a potential Ukraine-Russia ceasefire and some help from the cooler-than-expected U.S. inflation report.
In Treasuries, yields rose with the potentially inflationary impact of tariffs offseting optimism about cooling inflation.
“This is the last reading not impacted by tariff distortions, so to some extent the market’s a little bit hesitant to over-react to a better print,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities in New York.
The yield on benchmark U.S. 10-year notes rose 2.8 basis points to 4.316%, from 4.288% late on Tuesday while
the 30-year bond yield rose 3.2 basis points to 4.6355%.
The two-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 5 basis points to 3.991%, from 3.941% late on Tuesday.
With investor concerns mounting about recession and a global trade war, the yield spreads between corporate bonds and U.S. Treasuries widened late on Tuesday to their widest level since September.
In currencies, U.S. dollar performance was mixed due to counter currents of cooling inflation versus worries that tariffs could crank it up going forward.
The euro was down 0.25% at $1.0891 and against the Japanese yen, the dollar strengthened 0.38% to 148.33.
But the Canadian dollar strengthened 0.45% versus the greenback to C$1.44 per dollar and against the Swiss franc, the dollar weakened 0.08% to 0.882.
The Russian rouble reached a more than six-month high on Tuesday, but pulled back on Wednesday, weakening 1.75% against the greenback to 87.147 per dollar.
Oil prices rose as U.S. government data showed tighter oil and fuel inventories than expected, though investors kept an eye on mounting fears of a U.S. economic slowdown and the impact of tariffs on global economic growth.
U.S. crude settled up 2.16% or $1.43 at $67.68 a barrel while Brent settled at $70.95 per barrel, after rising 2% or $1.39 on the day.
Safe-haven gold rose, aided by tariff uncertainty and the cooler U.S. inflation report.
Spot gold rose 0.53% to $2,931.59 an ounce. U.S. gold futures rose 0.74% to $2,934.40 an ounce.
Elsewhere in metals, copper rose 1.31% to $9,789.00 a tonne while three-month aluminum on the London Metal Exchange fell 0.11% to $2,700.00 a tonne.
(Reporting by Sinéad Carew and Karen Brettell in New York, additional reporting by Elizabeth Howcroft in Paris, Tom Westbrook in Singapore; Editing by Alex Richardson, Matthew Lewis and Cynthia Osterman)
