Markets took encouragement from a report on Wednesday morning showing construction, retail and other US services businesses continued to grow last month, but not by as much as economists expected. The report from the Institute from Supply Management also said an index of prices paid was at its lowest level since March 2020, an encouraging trend for inflation.
That followed a report from earlier in the morning suggesting stronger gains than expected in hiring within the private sector. That report from the ADP Research Institute said employers accelerated their hiring last month, when economists were forecasting a slowdown.
A more comprehensive report on the job market for March will arrive from the US government on Friday, and it will likely be the week’s headline economic data.
Traders have already drastically reduced their expectations for how many times the Federal Reserve will cut interest rates this year, halving them from a forecast of six at the start of the year. Some are preparing for two or even zero cuts this year because the Fed may not want to begin lowering rates too close to November’s election out of fear of appearing political.
In the bond market, yields rose. The 10-year yield held steady at 4.36 per cent from late Tuesday, though it trimmed its advance following the cooler-than-expected report on US services businesses.
The two-year yield, which more closely tracks with expectations for Fed action, fell to 4.68 per cent from 4.70 per cent.
A climb in oil prices has also been adding pressure on inflation. A barrel of benchmark US crude climbed again, up 0.5 per cent to $US85.55 to bring its gain for the year so far to nearly 20 per cent. Brent crude, the international standard, rose by a similar amount and is up more than 16 per cent so far in 2024.
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In stock markets abroad, European indexes were mixed amid modest movements. A report showed inflation in Europe cooled by more than expected in March, but analysts say that might not be enough to move up the European Central Bank’s first cut to interest rates.
Asian markets fell more sharply earlier in the day, following up on Wall Street’s losses from Tuesday. Indexes fell 1.7 per cent in Seoul, 1 per cent in Tokyo and 1.2 per cent in Hong Kong.