Hot US inflation report stops Wall Street stocks rebound

A larger-than-expected rise in US wholesale prices Friday rekindled worries over the timing of interest rate cuts and brought a halt to Wall Street's recent rebound.

Markets shuddered after data released on Tuesday showed US consumer price inflation slowed less than expected in January, dealing a blow to hopes of an early interest rate cut by the US Federal Reserve.

After staging a small rebound, US equities slipped once more to finish the trading day firmly in the red.

The Dow Jones Industrial Average ended 0.4 percent lower, while the broad-based S&P 500 Index lost 0.5 percent and the tech-rich Nasdaq Composite Index dropped 0.8 percent.

Meanwhile, US Treasury yields, which can act as a proxy for interest rate expectations, rose on dwindling expectations of an early cut.

"Inflation concerns continued to drive Fed rate cut expectations lower and Treasury yields higher ahead of the weekend as import prices and the latest (Producer Price Index) release both came in quite hot," said Oxford Economics lead analyst John Canavan in a note.

Fed needs 'more time'

Speaking in Washington Friday, San Francisco Fed President Mary Daly said the US central bank should "resist the temptation to act quickly" as it contemplates the right time to begin interest rate cuts.

The Fed needs "more time and data" to ensure it realizes positive projections of inflation continuing to fall, she continued, adding that the Fed could afford to take a more "gradual approach."

"Gradual doesn't mean slow, it doesn't mean weak," she said. "It simply means not abrupt and urgently when you're facing a lot of uncertainty, and you already have policy in a good place."

Europe's stocks rallied Friday, with Frankfurt and Paris striking more record peaks after solid Asian gains, as investors shrugged off recessions in Britain and Japan.

London equities also jumped as investors drew comfort from a January rebound in UK retail sales, one day after the gloomy news that Britain had entered a technical recession.

UK retail sales volumes surged 3.4 percent in January, the fastest increase in almost three years, after sliding 3.3 percent in December, official data showed.

Sentiment was also buoyed by a jump in annual net profit at NatWest, which sent the UK bank's share price up over seven percent.

In Asia, Tokyo's Nikkei index ended at a new 34-year high, partly supported by the Wall Street rally on Wednesday and Thursday, including in tech shares.

Japan also entered recession at the back end of 2023, according to data released Thursday, with the Asian nation being overtaken by Germany as the world's third-largest economy.

Key figures around 2130 GMT

New York - Dow: DOWN 0.4 percent at 38,627.99 points (close)

New York - S&P 500: DOWN 0.5 percent at 5,005.57 (close)

New York - Nasdaq Composite: DOWN 0.8 percent at 15,775.65 (close)

London - FTSE 100: UP 1.5 percent at 7,711.71 (close)

Paris - CAC 40: UP 0.3 percent at 7,768.18 (close)

Frankfurt - DAX: UP 0.4 percent at 17,117.44 (close)

EURO STOXX 50: UP 0.5 percent at 4,765.65 (close)

Tokyo - Nikkei 225: UP 0.9 percent at 38,487.24 (close)

Hong Kong - Hang Seng Index: UP 2.5 percent at 16,339.96 (close)

Shanghai - Composite: Closed for holiday

Euro/dollar: UP at $1.0781 from $1.0772 on Thursday