Markets warm to US inflation figures


City Editor

Markets on both sides of the Atlantic warmed to unexpectedly benign US inflation figures yesterday, with both the FT-SE100 and Dow Jones indexes regaining recent lost ground.

Prices paid to farmers, factories and other producers fell for the first time in eight months in February as fuel and food costs declined, Labor Department figures showed. The overall producer prices index fell an unexpected 0.2 per cent last month while the core rate, which excludes often volatile food and energy costs, rose 0.1 per cent.

"Inflation is hard to find," said Robert Dederick, an enonomist at Northern Trust in Chicago. "You'll have to send a search party."

That was good news for both shares and bonds. In the US, the benchmark 30-year government bond climbed about a quarter point, pushing the yield down two basis points to 6.66 per cent. The Dow added more than 40 points to reach its highest intra-day level since last Friday's 171-point plunge on higher than expected payroll numbers.

In London, the FT-SE 100 index closed 41.5 points higher at 3681.8. Peter Cogliatti, a trader at Williams de Broe, said: "The market's looking good, we've regained our composure. It's going to be a little choppy for a while, but the fears of a major crash seem to be receding by the day."

Greg Nie, market analyst for Everen Securities in Chicago, said: "The producer price report is a plus for bonds, because if inflation can stay restrained, it gives bonds room for a recovery." US stocks, which have moved in parallel with bonds this week, also rose because of rising optimism that the economy is growing with little inflation and that earnings will match expectations this year. The dollar was also higher.

Separately, the Labor Department confirmed last week's job creation news with figures showing that fewer American workers applied for state benefits last week, with total new claims falling to their lowest level in eight weeks. First-time jobless claims declined by a larger than expected 10,000 to a seasonally adjusted 353,000.

Yesterday's report was the first assessment of US labour markets since the government said last Friday that the economy had added 705,000 jobs in February, the largest monthly gain in more than 12 years.

Analysts said the producer prices figures suggested investors over-reacted by pushing bond yields higher last week. Attention will focus today on consumer price and industrial production data to see if US interest rates have any further to fall.

The Fed lowered the key overnight lending rate in three steps from 6 per cent to 5.25 per cent between July 1995 and January following seven increases aimed at cooling consumer spending.

Start your day with The Independent, sign up for daily news emails
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas