Stocks slipped as investors cautiously await US inflation data By Reuters

Authors: Tom Wilson and Tom Westbrook

LONDON/SINGAPORE (Reuters) – European shares fell on Wednesday, mirroring losses in Asian stocks, as investors cautiously awaited U.S. inflation data that is expected to prompt the Federal Reserve to cut rates again, while the dollar held near a two-week high.

European shares fell 0.2%, easing further from seven-week highs touched on Monday, weighed down by a string of poor corporate results.

Investors were wary because – with an 85% chance of a US rate cut next week at the price and Wall Street indices around record highs – there is potential for disappointment.

The median forecast of economists polled by Reuters is for a 0.3% month-on-month increase in U.S. core and basic consumer prices in November. Neither forecast was above 0.3%, which analysts say leaves markets vulnerable to a surprise.

“US inflation has been on the stubborn side in recent months,” Deutsche Bank (ETR:) analysts wrote. “The general consensus is that it will be stronger again.”

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5%.

Still, US stock futures rose 0.1%. The index fell 0.3% on Tuesday, although it was only 65 points – a little less than 1% – short of its all-time high.

US yields were marginally higher, with benchmark 10-year yields steady at 4.230%. (USA/)

The index, which measures the currency against the yen and five other major parameters, rose slightly to 106.48. In the previous session, it reached a one-week high of 106.63.

fell and currencies across Asia lost against the dollar after Reuters reported that China was considering allowing a weaker currency next year to withstand rising tariffs.

The yuan fell about 0.3% to 7.2803 per dollar, while the Korean won and China’s sensitive Australian and New Zealand dollars also fell.

CUT AHEAD

The Canadian dollar hit a 4-1/2-year low on Tuesday and, at C$1.4165 to the dollar, was close to Wednesday’s close as traders saw an 89% chance the Bank of Canada would cut rates by 50 basis points later in Wednesday. (CAD/)

Canada has already cut rates by 125 basis points (bps) this cycle, but last week’s news that the unemployment rate rose to an eight-year high of 6.8% in November fueled bets on a further 50 basis point cut, which would bring overnight rate at 3.25%.

“We think today’s decision by the Bank of Canada may be somewhat passed on to the US,” ING analysts wrote, noting that a 50 basis point cut would signal a “strong view” that the Fed will cut rates by 25 basis points next week.

Broader foreign exchange markets were flat, with the euro down 0.2% to $1.051 and the yen last hitting 151.53 to the dollar. (FRX/)

Markets have fully priced in Thursday’s European Central Bank interest rate cut and a 61% chance of a 50 basis point cut by the Swiss National Bank, which would help cool the franc’s gains.

It was down 1% from the previous session to $0.6372. (AUD/)

Australia’s central bank left rates on hold on Tuesday, as expected, but dropped a veiled reference to the possibility of a future rate hike and sent the Australian dollar sharply lower.

Elsewhere in commodity markets, China’s major policy shift this week appeared to support oil prices, with futures up 0.3% at $72.38 a barrel.

Arabica coffee prices hit a record high of just above $3.48 a pound on Tuesday as traders worried drought would hurt production for Brazil’s biggest producer.