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US stocks fell on Tuesday, as traders reacted to the latest rise in oil prices and also prepared for a rush of monetary policy announcements from central banks around the world.
Wall Street’s S&P 500 was down 0.3 per cent in early afternoon trade in New York, with energy and industrials ranking as the benchmark’s worst-performing sectors. The tech-heavy Nasdaq Composite fell 0.3 per cent.
Oil prices hit session highs before New York’s opening bell on Tuesday and began to retreat, with US oil and gas stocks subsequently tracking the downward movement as the regular Wall Street trading session continued.
The moves in equity markets came ahead of the US Federal Reserve’s policy decision on Wednesday, with markets pricing in a 99 per cent chance that interest rates will remain unchanged.
More important for investors will be what rate-setters say about November’s meeting, as well as Fed officials’ outlook for short-term interest rate expectations. The UK, Switzerland and Japan are among the other countries whose central banks will announce policy decisions this week.
“Inflation has proved to be sneaky and central bankers find themselves in a less than straightforward position,” said Danni Hewson, head of financial analysis at AJ Bell.
“Move too far and they risk tanking their respective economies. Don’t move far enough and they risk cracking open the door and allowing prices to slide up.”
The latest US consumer price index data bolstered concerns that the Fed’s latest efforts to bring inflation back to its 2 per cent target might take longer than expected. Rising energy costs pushed the rise in the headline CPI figure to 3.7 per cent in August, above economists’ forecasts.
A measure of the dollar’s strength against six other currencies slid 0.1 per cent.
Brent crude, the international benchmark, extended gains into a fourth successive trading session, rising above $95 for the first time since November. Those early gains dissipated later in the session, leaving the price 0.2 per cent higher at $94.58 a barrel.
West Texas Intermediate, the US equivalent, also touched a 10-month high before oscillating between gains and losses later in the day.
Recent price gains have been spurred by news earlier this month that two of the world’s top producers, Saudi Arabia and Russia, will extend supply cuts until the end of the year.
Investors remain concerned the uptick in oil prices could hamper central banks’ efforts to tame inflation in the US and Europe, adding to the banks’ case for keeping interest rates higher for longer, despite indications suggesting that global economic growth was slowing.
“The latest spike in oil prices is massively unhelpful, especially as inflation was already above central banks’ 2 per cent targets,” said Dario Perkins, managing director of global macro at TS Lombard. “That said, it is important to keep these recent inflationary developments in context. We are not yet in danger of undoing 12 months of solid disinflationary progress — not even close.”
Elsewhere, the region-wide Stoxx Europe 600 index closed less than 0.1 per cent lower, with positive moves for real estate, financials and energy stocks cancelled out by declines for healthcare groups and industrials. London’s FTSE 100 rose 0.1 per cent, as did France’s Cac 40.
China’s benchmark CSI 300 index fell 0.2 per cent, while Japan’s Topix was up 0.1 per cent as markets reopened after a holiday.