By Koh Gui Qing and Elizabeth Howcroft
NEW YORK/PARIS (Reuters) -Global stocks held steady and government bond yields retreated a touch on Wednesday after data showed U.S. consumer prices rose moderately in July, as expected, reinforcing investor bets that the Federal Reserve could start cutting interest rates soon.
But the size of the Fed’s first cut, which many investors are hoping will take place in September, is still in doubt as the market debates the chances of a 25 or a 50 basis-point reduction.
The consumer price index increased 0.2% last month after falling 0.1% in June, data showed, in line with economists’ expectations, though inflation in shelter, which includes rents, accelerated in July compared with June.
“The one thing that was surprising here was rent accelerating,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities in New York.
“I think that’s the reason for the market’s somewhat disappointed reaction, even though the print actually came in on the weaker side of consensus.
“I do think the market is reassessing the odds of a 50 basis-point rate cut in September. That pricing seems to have dropped from about 39 base points ahead of the reading to 36 basis points now.”
By 1415 GMT the was down 0.15%, the added 0.19% and the fell 0.6%. [.N] The MSCI World Equity index was up 0.15% on the day, at its highest in 12 days.
In line with expectations that U.S. monetary policy will soon be eased, the benchmark fell to 3.8238%, and the two-year yield was steady at 3.9392%.
Europe’s was up 0.3% on the day, while London’s was up 0.4% after data showed British inflation rose less than expected in July.
POLICY EASING
Central banks around the world have successively began to cut interest rates in recent months as inflation cooled. New Zealand’s central bank cut interest rates for the first time in four years on Wednesday, and signalled more monetary policy easing to come. The move sparked a sell-off in the dollar, which was down around 1% on the day.
The Japanese yen and the wobbled after Japan’s Prime Minister Fumio Kishida said…
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