Investors shift focus to the semi-annual testimony of Fed Chair
Wall Street stocks finished lower overnight, as a jump in U.S. inflation fueled expectations of a quicker end to Federal Reserve stimulus. The U.S. consumer price index rose 0.9% in June, the largest gain since June 2008. Elsewhere, democrats on the U.S. Senate Budget Committee reached an agreement on a $3.5-trillion infrastructure investment plan. The S&P 500 fell 0.35%, the Dow Jones dropped 0.31%, and the Nasdaq Composite shed 0.38%.
Tracking a decline on Wall Street, Asian shares were mostly lower on Wednesday. Surging coronavirus cases in several countries including South Korea and Japan were another concern. As such, Japan’s Nikkei 225 edged down nearly 0.4%, South Korea’s Kospi shed 0.20%, Hong Kong’s Hang Seng lost 0.63% while Australia’s S&P/ASX 200 bucked the trend to finish 0.31% higher.
In Europe, equities headed lower on Wednesday. Strong consumer price data from the U.K. added to inflation concerns. The U.K. consumer price index climbed 2.5% year-over-year in June versus 2% expected. The pan-European Stoxx 600 fell 0.3% in early trade. Now, investors shift focus to the semi-annual testimony of Fed Chair Jerome Powell to Congress on Wednesday and Thursday.
The dollar eased slightly on Wednesday as traders proceeded to profit-taking following yesterday’s rally triggered by higher-than-expected inflation figures. Later in the day, some signs of a slowdown in inflationary pressure could be seen in PPI. In this scenario, the greenback may see a deeper retreat while Powell’s speech would be in focus. If the Fed governor delivers a less hawkish hint, risk sentiment would improve somehow.