By Herbert Lash and Amanda Cooper
NEW YORK/LONDON (Reuters) -Global stocks rebounded and bond yields retreated on Wednesday after data showed U.S. services industry growth eased further in March, suggesting inflation is slowing, but not enough for the Federal Reserve to say when interest rates cuts can begin.
The U.S. central bank had been expected to start cutting rates as early as June, but robust economic data boosted Treasury yields this week to multi-month highs and many in the market questioned that timetable.
Fed chief Jerome Powell, said policy makers need to “have greater confidence that inflation is moving sustainably down” toward the 2% target.
Stocks on Wall Street and in Europe fell after the ADP National Employment Report showed the median wage for workers switching jobs jumped 10% on a year-on-year basis in March after increasing 7.6% in February. Higher wages can spur inflation.
But the Institute for Supply Management (ISM) survey for the U.S. services industry showed a measure of prices paid by businesses for inputs dropped to a four-year low, easing fears about inflation.
MSCI’s gauge of global stock performance rose 0.03%, while bond yields retreated. The benchmark 10-year Treasury note’s yield fell 1 basis points to 4.355% after hitting a four-month high.
Survey data such as ISM’s have been less useful in gauging the economy than gross domestic product, employment and even retail sales numbers, said Joe LaVorgna, chief U.S. economist at SMBC Nikko Securities in New York.
“One of the problems is that the survey data have not been particularly accurate,” he said.
“I’m not sure the equity market’s reacting to any specific set of data at this point. It just seems to be a constant inflow (of investment) as the market keeps getting excited. One about AI and secondly about the prospects of an Immaculate landing.”
The pan-European index rose 0.29%, as the ISM data cheered European investors. On Wall Street, the lost 0.06% and the added 0.05%, but the fell 0.3%.
The Fed should not cut its benchmark rate until year’s end, Atlanta Fed President Raphael Bostic told broadcaster CNBC, maintaining his view that policymakers should reduce borrowing costs only once in 2024.
The held near its highest level in more than four months, pinning the yen close to its lowest in decades, though the increased threat of currency intervention by Tokyo capped further declines in the Japanese currency.
The dollar index, a measure of the U.S. currency against six major trading partners, fell 0.45%. The dollar rose 0.09% to 151.67 yen.
Oil prices edged higher as investors mulled supply risks stemming from Ukrainian attacks on Russian refineries and the potential for escalation in the Middle East conflict, while OPEC+ ministers held steady their output policy.
settled up 28 cents at $85.43 a barrel, while rose 43 cents to settle at $89.35 a barrel.
Gold prices raced to a record high yet again. U.S. settled 1.5% higher at $2,315 an ounce.
rose 0.32% to at $65,870.00.
