(Bloomberg) — Global stocks edged lower Wednesday as investors awaited key US inflation data amid concerns that President-elect Donald Trump’s proposed ‘America-First’ policies will reignite price growth.
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Europe’s Stoxx 600 index ceded earlier modest gains, while contracts for the S&P 500 and Nasdaq 100 slipped 0.2%. With Elon Musk and Vivek Ramaswamy picked to lead the new Department of Government Efficiency, Musk’s EV maker Tesla Inc. rallied in premarket trading, as did biotech firm Roivant Sciences Ltd. which was founded by Ramaswamy.
However, the dollar index’s recent surge stalled near two-year highs, while Treasury yields were little changed after rising about 10 basis points on Tuesday. Bitcoin also fell after a chart-busting rally took the digital asset to almost $90,000.
With Trump’s cabinet appointees widely expected to implement inflationary policies on immigration, trade and the economy, traders are pricing in fewer interest-rate cuts by the Federal Reserve next year. Today’s US data is expected to reinforce the view that inflation will remain sticky, with the overall consumer price index seen increasing by 0.2% for a fourth month.
The bond market seems to be pricing in higher inflation, which could continue pushing the entire long end of the yield curve higher, according to Susana Cruz, Panmure Liberum strategist.
“Equity markets, however, appeared to ignore this last week post-election, assuming high real growth from Trump’s policies,” Cruz said. “That’s unrealistic given rising capital costs, and this is likely behind the current correction.”
Minneapolis Fed President Neel Kashkari said Tuesday said he’ll watch the US inflation data closely to determine whether another rate cut is appropriate at the US central bank’s December meeting. Traders are pricing in about two US rate cuts through June, compared with almost four seen at the start of last week.
America’s election outcome continues to reverberate across the globe, with trade barriers expected to hurt economic growth in the developing world. An MSCI gauge of equities excluding the US is posting its worst day in three months, while an index of emerging market currencies is close to erasing this year’s gains. China’s yuan hit a three-month low Tuesday, forcing authorities to set the currency’s reference rate higher.
