US consumer inflation slowed to 3.4 percent in July from 3.5 percent the previous month, in line with analyst forecasts.
Analysts said the report likely gives the US Federal Reserve more latitude to hold off on imminent interest rate increases, despite persistent inflation above Fed targets.
Major indices spent most of the day in positive territory, propelled by a rally in semiconductor shares following strong earnings reports from CoreWeave and other artificial intelligence players.
But yields on the 10- and 30-year US Treasury bonds climbed after the federal consumer price index (CPI) report, showing “market participants are still looking for inflation to continue,” said Briefing.com analyst Patrick O’Hare.
O’Hare said US Treasury data showing the July deficit growing to US$432.3 billion, the highest monthly figure since 2021, as a reminder that of lofty bond supply.
US markets on Thursday will digest July data for wholesale inflation, another key input to the Fed outlook.
Still, gains by semiconductors and other companies indicates that “overall you still have a market pretty disposed to upside action,” O’Hare said.
While both the S&P 500 and Nasdaq rose, the Dow finished the session with a slight loss.
Paris, London and Frankfurt closed marginally lower, pulled down by energy shares.
Trading in London “was defined by caution rather than conviction. Investors remained focused on the ongoing Middle East conflict and the unresolved question of whether the Strait of Hormuz will reopen,” said Patrick Munnelly, a strategist at Tickmill Group.
Oil prices stabilised on Wednesday after big swings in recent weeks as US-Iran war tensions ebbed and flowed.
Pakistan’s interior minister was visiting Iran to discuss regional security, stability and other developments, as Islamabad tries to mediate a resolution to the conflict.
It comes as the International Energy Agency (IEA) sharply reduced its forecast for global oil demand this year, as supplies remain crimped by the closure of the Strait of Hormuz and high prices deter buyers.
Demand is expected to slump by 1.6 million barrels per day compared with its forecast slump of one million in its July report.
“The ongoing closure of the Strait of Hormuz and elevated fuel prices continue to weigh on oil consumption,” the Paris-based IEA said. (AFP)
