US stocks up, but yields, dollar ease on hot inflation data

• The 10-Year US Treasury yield fell to 1.71% while the dollar index fell below 95.00 for the first time in over two months.

• Tesla stock was the biggest gainer on Nasdaq, while oil, gold and Bitcoin were all up on the day.

Bond yields retreated and the dollar index eased as data released on Wednesday by the US Labour Department showed inflation increased to a 40-year annual high of 7% in 2021.

While the 10-year US Treasury yield had reached a two-year high of 1.80% earlier in the week, Wednesday saw the long-term government drop to lows of 1.71%, falling by more than 3.3 basis points on the day and more than 5.0 basis points over the past two days.

The bond market across Europe and Asia also tracked declines in yields as the 10-year UK Treasury yield and the 10-year Japanese Treasury yield fell by 14 and 31 basis points to 1.12 and 0.121 respectively.

Data showed that the consumer price index jumped 0.5% in December, higher than the estimated 0.4%. It also followed the 0.8% CPI jump in November, with annualised inflation up to 7% for the year and the highest pace since 1982.

The economic outlook is key as the Fed moves to curb runaway prices. It is expected the central bank will introduce the first rate hike in March, while there are projections for an overall four hikes in 2022.

Forex

In currencies, the US dollar was struggling against its peers.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was down 0.7% at 94.94. It did not just lose the support at 95.00 but also slipped to its lowest peg for over two months.

The Australian dollar, Japanese yen, Sterling and euro all gained against a weaker dollar. The AUD/USD pair rose 1.1% to 0.729, while the yen edged 0.78% and the sterling 0.5%.

The GBP/USD pair was up 0.77%, helped by the weakness in the greenback and an overall bullish uptick regarding a potential interest rate hike by the Bank of England.

The Canadian dollar also rose in early trades but was struggling in late afternoon trades on Wall Street at -0.54%.

US stocks edge higher

Elsewhere, stocks jumped on the inflation data as investors’ risk appetite showed, buoyed by declines in yields and the dollar.

Wall Street was higher, with gains for the Nasdaq Composite leading the charge after Asian and European markets also closed higher. The Nasdaq composite was 0.4% up at 15,205.72 in early afternoon trades, while the S&P 500 and the Dow Jones Industrial Average were 0.3 and 0.05% up respectively.

Tesla (TSLA) was the biggest gainer on Nasdaq by 4.5% while Biogen Inc (BIIB) was the biggest loser at over 7% in intraday trading.

In other markets,  oil prices continued to surge as the West Texas Intermediate (WTI) crude soared 1.68% to $82.99 a barrel.

Gold was also up, gaining 0.5% to $1,828 per ounce. Silver also edged higher by 1.9% to $23.25 an ounce, while copper surged 3.6% to $4.59 per pound.

Bitcoin was up 2.5% as it flipped to intraday highs above $43,700.