US consumer prices rose at a slower pace than expected in February, giving investors some hope that the Federal Reserve will be able to support the world’s biggest economy as the White House’s trade war continues to heat up.
President Donald Trump’s 25% tariff on steel and aluminium imports came into effect on Wednesday in the US, triggering tit-for-tat responses from Canada and the European Union and the threat of additional levies if they go ahead with those plans.
US consumer prices rose at an annual pace of 2.8% in February, coming in below expectations, in the first full reading under the Trump administration, albeit before tariffs came into effect.
Meanwhile, the Bank of Canada cut its benchmark interest rate a quarter-point to 2.75% and said it will take a more cautious approach to any future reductions as it balances the impact of tariffs driving up prices with weakness in demand.
“Consumer prices have not been materially impacted by the initial 10% tariff on China that took effect on February 4,” Bank of New Zealand senior interest rates strategist Stuart Ritson said in a note. “However, business surveys point to upward pressures for goods prices and there is considerable uncertainty about what the actual tariffs will be and the eventual pass-through to consumer prices.”
The response on Wall Street was mixed as investors remain jostled by the heightened uncertainty in the global environment.
The tech-heavy Nasdaq Composite bounced off its selloff earlier this week rising 0.8% in afternoon trading, with Tesla climbing 7.9% and Nvidia up 5.9%, while the Dow Jones Industrial Average dipped 0.2% as familiar names such as McDonald’s, Proctor & Gamble and Walmart all declined.
European stock markets rallied with the prospect of a Ukraine ceasefire and the softer US inflation reading supporting investor sentiment on that side of the Atlantic.
Germany’s DAX 30 rose 1.6% while the UK’s FTSE 100 index advanced 0.5%.
Danish drug-maker Novo Nordisk dropped 4.3% after Roche struck a deal with Zealand Pharma to develop a new weight-loss treatment.
Bad timing
The timing of the slump in global stock markets might play on the minds of fund managers hearing the pitch from Fonterra Cooperative Group as it touts its consumer Mainland Group unit as a potential initial public offering candidate.
The dairy exporter is considering listing the consumer division or selling it to a trade buyer, and is shopping it around New Zealand, Australia and Asia.
The Australian Financial Review’s Street Talk column reported an IPO could seek to raise between A$1.5 billion and A$2 billion, putting a valuation on the consumer business as high as A$4 billion.
Unsettled markets have been known to scuttle potential listings in the past.
The more benign US inflation data and recovery in tech stocks has flowed through to the antipodes, with Australian futures pointing to a 0.2% increase for the S&P/ASX 200 index, which is toying with entering correction territory. The kiwi dollar rose to 57.25 US cents at 7am in Auckland from 57.01 cents yesterday.
Local data today include Statistics New Zealand’s travel and migration figures for February, while prime minister Christopher Luxon’s infrastructure investment summit in Auckland kicks off, with a series of announcements expected to coincide with the wooing of foreign investment into the nation.
And peace has broken out at Singapore’s City Developments Ltd with executive chair Kwek Leng Beng discontinuing his court action to dump his son, Sherman Kwek, as chief executive, with all current directors staying on the board.
“We will all continue to focus on strengthening CDL’s business, in accordance with good corporate governance, now and in the future, including completing the raft of landmark developments underway across Singapore and globally, furthering the expansion of various brands under Millennium & Copthorne, continuing our capital recycling initiative and above all, maximising shareholder value,” Kwek Leng Beng said in a statement.
CDL’s internal ructions loomed over its takeover offer for Millennium & Copthorne Hotels New Zealand, where its bid to buy out minority shareholders has been knocked back by independent directors as being too low.
Reporting by Paul McBeth. Image from No Revisions on Unsplash.
