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US stocks open higher but investors remain skittish

Concerns remain that fresh data on inflation expected Wednesday could spark a fresh selloff in stocks and bonds

Gulf News

NEW YORK: US stocks rose early Monday ahead of a heavy week of key economic data releases and policy announcements by President Donald Trump as investors hoped to shake off last week’s volatility. World shares climbed half a per cent. Technology and financial shares led Wall Street’s three main indexes

About 15 minutes into trading, the Dow Jones Industrial Average had gained 1.4 per cent and stood at 24,537.98.

The broad-based S&P 500 was up 1.3 per cent to 2,654.15, and the tech-rich Nasdaq Composite Index also advanced 1.3 per cent to 6,965.55.

The early gains were a continuation of the positive momentum that closed Friday’s trading after a topsy-turvy session that saw the Dow swing more than 1,000 points.

Still, analysts were guarded about the market’s prospects. Sentiment has been pressured over the last 10 days or so by worries that the prospect of higher inflation will prompt the Federal Reserve to accelerate its interest rate hikes.

Rising interest rates could then draw investors out of stocks and into bonds.

“The markets appear to remain skittish as Treasury yields are mixed on the heels of a recent jump and some key inflation data later this week is expected to headline a fully-loaded economic docket,” said a note from Charles Schwab.

Key economic releases include new data on consumer price inflation and retail sales.

“People are nervous after the shock of the past week but it doesn’t feel like there is a crisis around the corner. But never say never,” said Grant Lewis, head of research at Daiwa Capital Markets in London.

While equity markets attempt to recover, the question is whether they can withstand another sharp move up in bond yields — something will be put to the test by economic data this week.

Analysts forecast US consumer price inflation, to be released on Wednesday, to have slowed to 1.9 per cent in January from a year earlier, while the core measure is seen ticking down to 1.7 per cent.

Given it was fears of faster inflation — and more aggressive rate rises — that triggered the global rout in the first place, an above-forecast figure could well spark a fresh sell-off in stocks and bonds.

Central bankers have not exhibited much concern over the equity rout, indicating they intend to push on with plans to tighten monetary policy this year.

Meanwhile, Trump is due to unveil proposals on infrastructure spending, as well as a federal budget that reportedly will scrap a long-standing Republican goal of eliminating the deficit.