Treasury yields slip on USA inflation data, stocks up

Treasury yields slip on USA inflation data, stocks up

While investors cheered an increase in the US producer price index (PPI) for last month announced Thursday, inflation concerns were still in focus ahead of consumer price index (CPI) data on Friday after Federal Reserve minutes showed a more guarded view.

Excluding the volatile food and energy components, consumer prices gained 0.1 percent in September.

U.S. Treasury yields dipped and the dollar rose slightly on Thursday as investors awaited U.S. inflation data while Wall Street stock indexes fell as earnings season kicked off with a whimper.

A surge in energy prices in the aftermath of Hurricane Harvey pushed US inflation rate in September to an eight-month high, while the core inflation less food and energy remained muted, according to a report released by Labor Department on Friday.

American consumer prices recorded their biggest increase in eight months in September as petrol prices soared in the wake of hurricane-related production disruptions at oil refineries in the Gulf Coast area, but underlying inflation remained muted.

Earlier in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan hit a 10-year high.

A majority of Fed rate setters believe inflation will trend higher in the coming months due to labour market tightness and the improving global economy, with a December rate hike seen by the market before the data print as virtually nailed on.

The dollar lost its earlier gains following the data as traders considered the impact on a likely quarter-point interest rate increase from the Federal Reserve in December.

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"With growth and the domestic economy booming, wages recently increasing, Fed officials appeared hawkish running into year-end, and understandably so".

The Fed targets a 2% annual inflation rate, as measured by the Commerce Department's personal-consumption expenditures price index.

"PPI was a little bit better, but that doesn't really translate well to CPI", said Gennadiy Goldberg, an interest rate strategist at TD Securities in NY. The expectation for inflation in five to 10 years was 2.4%, the lowest reading since May.

"Many participants expressed concern that the low inflation readings this year might reflect not only transitory factors, but also the influence of developments that could prove more persistent", said the Minutes of the Fed's September 19-20 meeting published on Wednesday.

The price index of a small basket in September 2017 compared to August 2017 was 100.7% and the overall increase since the beginning of the year (September 2017 compared to December 2016) has been 102.1%. Prices for drugs, cars and clothing fell last month.

Data from Friday's report will be used to calculate next year's cost-of-living adjustment for the 66.7 million Americans who receive Social Security benefits.

Real average weekly earnings.

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