By Herbert Lash and Kevin Buckland
NEW YORK/TOKYO (Reuters) – Gold prices hit new record highs on Monday, with Wall Street stocks finishing mixed as optimism about the Federal Reserve’s next interest rate cut waned. weakened due to the strong US economy rejecting the need for cuts. anytime soon.
Chinese stocks led a rally across much of Asia overnight amid a broadly upbeat global economic backdrop, while the dollar rose after data showed the US manufacturing sector grew in March for the first time since September 2022.
What had been an optimistic read on key US inflation last week quickly darkened as the market weighed the strength of the US economy against the need for immediate rate cuts.
The government’s three measures of U.S. inflation – CPI, PPI and PCE – show that the improvement has plateaued, leading to questions about when and how much the Fed will cut, said Kevin Flanagan, head of fixed income strategy at WisdomTree at New York.
“Markets are reevaluating what they thought was going to be a very aggressive rate cut,” Flanagan said.
“If they go to June or July, whatever, what’s that going to be like? Right now, the data would show it’s not going to be uniform.”
Oil prices remained near five-month highs as markets expect supply to tighten due to OPEC+ cuts and after attacks on Russian refineries, with Chinese production data supporting a stronger demand outlook strong.
The , which measures the U.S. currency against six major currencies, rose 0.47%.
The MSCI index of global stocks fell 0.36%.
On Wall Street the decline was 0.6%, the decline was 0.20%, but the gain was 0.11%.
European markets remained closed on Monday and most global markets were closed on Friday.
Fed Chair Jerome Powell said Friday that the inflation data released that day “is what we expected” and that “you won’t see us overreacting,” suggesting the U.S. central bank is content to remain in wait-and-see mode . .
Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, said the Fed doesn’t want to relive the 1970s, when it cut too early and inflation reignited.
“The potential for a cut continues to be dismissed because Powell says almost giddily that this is a great environment. Interest rates are above average, not hugely above, but above average.
“It’s better to keep those cuts in your pocket.”
Friday’s report of personal consumption expenditure (PCE) price index data had earlier fueled expectations for looser monetary policy in the United States, sending gold to a fresh all-time high.
Gold pared gains as the dollar and bond yields rose. Gold prices tend to move inversely to interest rates because when rates rise, gold becomes relatively less attractive.
it hit an all-time high of $2,265.49 an ounce early in the session. The United States settled 0.9% higher at $2,236.50 an ounce.
U.S. Treasury yields rose as stronger-than-expected manufacturing data raised doubts about the Fed’s ability to deliver on the three interest rate cuts outlined in its forecast at its latest policy meeting.
The two-year Treasury yield, which reflects interest rate expectations, rose 9.2 basis points to 4.712%. The 10-year yield rose 12.3 basis points to 4.317%, after earlier hitting a two-week high of 4.337%.
Japanese stocks had fallen earlier, with the yen stuck near levels that had traders on watch for currency intervention. The yen remained below 152 per dollar.
It fell 1.4% at the close, weighed down by concerns about a yen-buying intervention that could damage exporters’ profit prospects and returns for foreign investors.
rose 42 cents to settle at $87.42 a barrel, while it rose 54 cents to settle at $83.71 a barrel.