San Francisco Frontiers - Hot US inflation data hits Wall Street stocks, lifts dollar

The much-anticipated data showed US consumer prices in March were up 0.4 percent from February and 3.5 percent from the year prior, both slightly above the expected level.

"US CPI came in hotter than expected at +0.4 percent month-on-month, sending traders to exit bets on a June rate cut and dump stocks," said Neil Wilson, chief market analyst at Finalto.

US stocks futures immediately dove after the data and major indices spent the entire session in the red.

"The stock market is trying to recalibrate what the world looks like if we get two or fewer rate cuts this year," said Art Hogan of B. Riley Financial.

European equities, which turned negative after the US inflation data, rallied to end the day with modest gains in most markets.

At the start of the year investors had expected the Fed could make six rate cuts of 0.25 percentage points in 2024. Those expectations have steadily dropped.

"The market is now pricing in less than 2 rate cuts from the Fed for this year," said Kathleen Brooks, research director at XTB online brokerage.

Brooks noted that Federal Reserve chair Jerome Powell called the recent elevated inflation rates "bumps along the road."

"After March's higher than expected inflation reading, this looks less like a bump in the road, and more of a pathway towards higher for longer inflation, and higher for longer interest rates," Brooks said.

The European Central Bank, buoyed by slowing inflation, is expected to keep eurozone borrowing costs on hold one last time Thursday while laying the ground for a first interest rate cut in June.

The dollar strengthened significantly against other major currencies following the inflation report, including the yen, which sank to a nadir of $152.98, the lowest point since June 1990.

- Key figures around 2030 GMT -

New York - Dow: DOWN 1.1 percent at 38,461.51 (close)

New York - S&P 500: DOWN 1.0 percent at 5,160.64 (close)

New York - Nasdaq Composite: DOWN 0.8 percent at 16,170.36 (close)

London - FTSE 100: UP 0.3 percent at 7,961.21 (close)

Paris - CAC 40: DOWN less than 0.1 percent at 8,045.38 (close)

Frankfurt - DAX: UP 0.1 percent at 18,097.30 (close)

EURO STOXX 50: UP 0.2 percent at 5,000.83 (close)

Tokyo - Nikkei 225: DOWN 0.5 percent at 39,581.81 (close)

Hong Kong - Hang Seng Index: UP 1.9 percent at 17,139.17 (close)

Shanghai - Composite: DOWN 0.7 percent at 3,027.33 (close)

Dollar/yen: UP at 152.96 yen from 151.76 yen on Tuesday

Euro/dollar: DOWN at $1.0747 from $1.0857

Pound/dollar: DOWN at $1.2543 from $1.2678

Euro/pound: UP at 85.67 pence from 85.63 pence

Brent North Sea Crude: UP 1.2 percent at $90.48 per barrel

West Texas Intermediate: UP 1.1 percent at $86.21 per barrel

burs-jmb/mlm

Y.Harris--SFF