U.S. stocks slump as pricing data sparks Fed uncertainty; Dow down 0.73%

U.S. stocks fell on Wednesday after wholesale pricing data missed expectations and added to uncertainty as to when the Federal Reserve will begin to scale back stimulus programs.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.73%, the S&P 500 index fell 0.52%, while the Nasdaq Composite index fell 0.41%.

The Department of Labor reported that the U.S. producer price index came in flat last month, missing expectations for a 0.3% increase after a 0.8% increase in June.

The core producer price index eased up 0.1% in July, missing forecasts for a 0.2% increase.

The report dampened expectations that U.S. recovery is strong enough for the Federal Reserve to begin tapering its USD85 billion-a-month asset-purchasing program at least in September when it holds its next monetary policy meeting.

Bond purchases tend to keep stocks elevated by keeping borrowing costs low.

Despite the soft producer price data stocks fell among sentiments that even if the Fed holds off on tapering at its September meeting, such a decision could likely come in December.

Elsewhere, St. Louis Fed President James Bullard said the Fed needs to see more economic indicators before it begins to tapering, which erased earlier losses though gains were short lived, as markets concluded that be it September or December, the days of Federal Reserve support for stock prices are numbered.

Trading volume was light.

Leading Dow Jones Industrial Average performers included Bank of America, up 0.62%, Alcoa, up 0.37%, and Microsoft, up 0.34%.

The Dow Jones Industrial Average's worst performers included Home Depot, down 2.53%, Johnson & Johnson, down 2.48%, and Boeing, down 1.98%.

European indices, meanwhile, finished largely higher.

After the close of European trade, the EURO STOXX 50 rose 0.34%, France's CAC 40 rose 0.53%, while Germany's DAX 30 finished up 0.27%. Meanwhile, in the U.K. the FTSE 100 finished down 0.37%.

On Wednesday, the U.S. is to release official data on producer price inflation.

On Thursday, the U.S. will release data on consumer inflation, jobless claims, industrial production and manufacturing data from the New York and Philadelphia Federal Reserve branches.

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Forex - Dollar slumps on U.S. pricing data, euro zone growth rate

The dollar softened against most major currencies on Wednesday in a lackluster session that saw investors avoid the dollar after soft wholesale pricing data hit the wire and left investors guessing when the Federal Reserve will begin tapering stimulus programs later this year.

Stimulus tools such as the Fed's USD85 billion monthly bond-buying program weaken the dollar to spur recovery. 

The dollar took back some of its losses amid late-session sentiments that soft data notwithstanding, the Fed remains on track to tapering stimulus programs later this year.

In U.S. trading on Wednesday, EUR/USD was down 0.03% at 1.3258.

The Department of Labor reported that the U.S. producer price index came in flat last month, missing expectations for a 0.3% increase after a 0.8% increase in June.

The core producer price index eased up 0.1% in July, missing forecasts for a 0.2% increase.

Upon release, the numbers dampened expectations that U.S. recovery is strong enough for the Federal Reserve to begin tapering its USD85 billion-a-month asset-purchasing program at least in September when it holds its next monetary policy meeting.

The dollar, however, saw some support among others harboring sentiments that even if the Fed holds off on tapering at its September meeting, such a decision could likely come in December and usher in the end of ultra-loose monetary policy that has kept the greenback weak for years.


The euro and other higher-yielding currencies enjoyed support on data showing that the euro zone economy began expanding anew in the second quarter, breaking free from an 18-month recession.

The euro zone's gross domestic product expanded by 0.3% in the second quarter, outpacing market calls for quarter-on-quarter growth of 0.2%. 

France’s economy grew 0.5%, while Germany’s economy expanded by 0.7%.


The greenback, meanwhile, was down against the pound, with GBP/USDup 0.37% at 1.5506.

The U.K. unemployment rate remained unchanged at 7.8% in June, according to the Office of National Statistics, in line with expectations. 

The number of individuals claiming unemployment benefits fell by 29,200 in July, better than expectations for a decline of 15,000, which gave the pound support as did the minutes of the Bank of England’s July meeting, which showed that the decision to provide forward guidance on future rate increases was not unanimous.

The BoE has established conditions under which forward guidance on rates would not apply. One of these says bank will consider raising rates if medium term inflation expectations rise above 2.5% over 18 to 24 months.

Monetary Policy Committee member Martin Weale called for tougher measures to ensure that the pledge to hold rates at record lows did not lead to a pickup in inflation though he did say he accepted the principles of forward guidance.

Last week the BoE announced plans to keep interest rates on hold at record lows as long as the U.K. unemployment rate remains above 7%.

The dollar was down against the yen, with USD/JPY down 0.06% at 98.16, and up against the Swiss franc, with USD/CHF trading up 0.19% at 0.9350.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.14% at 1.0330, AUD/USD up 0.33% at 0.9142 and NZD/USD trading up 0.89% at 0.8035.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.03% at 81.76.

On Thursday, the U.S. will release data on consumer inflation, jobless claims, industrial production and manufacturing data from the New York and Philadelphia Federal Reserve branches.

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Forex - GBP/USD gains on soft U.S. pricing data, solid U.K. jobs report

The pound traded higher against the dollar on Wednesday after U.S. wholesale pricing data came in short of expectations while a U.K. jobs report met market consensus.

In U.S. trading on Wednesday, GBP/USD was trading at 1.5512, up 0.41%, up from a session low of 1.5423 and off from a high of 1.5546.

Cable was likely to find support at 1.5207, the low from Aug. 7, and resistance at 1.5574, Thursday's high.

The U.K. unemployment rate remained unchanged at 7.8% in June, according to the Office of National Statistics, in line with expectations. 

The number of individuals claiming unemployment benefits fell by 29,200 in July, better than expectations for a decline of 15,000, which gave the pound support as did the minutes of the Bank of England’s July meeting, which showed that the decision to provide forward guidance on future rate increases was not unanimous.

The BoE has established conditions under which forward guidance on rates would not apply. One of these says bank will consider raising rates if medium term inflation expectations rise above 2.5% over 18 to 24 months.

Monetary Policy Committee member Martin Weale called for tougher measures to ensure that the pledge to hold rates at record lows did not lead to a pickup in inflation though he did say he accepted the principles of forward guidance.

Last week the BoE announced plans to keep interest rates on hold at record lows as long as the U.K. unemployment rate remains above 7%.

Meanwhile in the U.S., the Department of Labor reported that the country's producer price index came in flat last month, missing expectations for a 0.3% increase after a 0.8% increase in June.

The core producer price index rose 0.1% in July, missing forecasts for a 0.2% increase.

A weak producer price index suggest inflationary pressures remain soft and stokes expectations that the Federal Reserve will keep the economy on monetary support.

The numbers dampened expectations that U.S. recovery is strong enough for the Federal Reserve to begin tapering its USD85 billion-a-month asset-purchasing program in the near future, which has kept the dollar weak since its inception.

The pound, meanwhile, was up against the euro and up against the yen, with EUR/GBP down 0.42% at 0.8548 and GBP/JPY up 0.34% at 152.23.

On Thursday, the U.K. is to release official data on retail sales.

The U.S. will release data on consumer inflation, jobless claims, industrial production and manufacturing data from the New York and Philadelphia Federal Reserve branches.

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Dollar erases gains vs. euro, yen in quiet trade

The dollar gave up gains against the euro and the yen on Wednesday after data showed that U.S. producer price inflation slowed in July, raising doubts over when the Federal Reserve may start to phase out is asset purchase program. 

During U.S. morning trade, the dollar erased gains against the euro, withEUR/USD edging up 0.06% to 1.3268, after falling to lows of 1.3239.

The Department of Labor said producer prices were flat last month, confounding expectations for a 0.3% increase after a 0.8% increase in June.

The core producer price index eased up 0.1% in July, missing forecasts for a 0.2% increase.

The disappointing data raised fresh doubts over whether the economic recovery is strong enough for the Fed to begin unwinding its USD85 billion-a-month asset purchase program later this year.

The euro slipped lower against the dollar earlier in the session in spite of data showing that the euro zone economy returned to growth in the second quarter, emerging from an 18-month recession.

Eurostat said the bloc’s economy expanded by 0.3% in the three months to June. Economists had expected quarter-on-quarter growth of 0.2%. It was the fastest quarterly expansion since the first quarter of 2011.

France’s economy expanded 0.5% in the three months to June, following two consecutive quarters of contraction, while Germany’s economy expanded by a larger

The dollar fell to session lows against the yen, with USD/JPY down 0.27% to 97.94.

The dollar also fell to session lows against the pound, with GBP/USDrising 0.55% to 1.5534.

Sterling was boosted after Bank of England minutes showed that policymakers were divided on forward guidance and a separate report showed that the U.K. unemployment rate was unchanged in June. 

The Office of National Statistics said the U.K. unemployment rate remained unchanged at 7.8% in June, in line with expectations. The number of people claiming unemployment benefits fell by 29,200 in July, better than expectations for a decline of 15,000.

Separately, the minutes of the BoE’s July meeting showed that the decision to provide forward guidance on future rate increases was not unanimous.

Monetary Policy Committee member Martin Weale wanted tougher measures to ensure that the pledge to hold rates at record lows did not lead to an uptick in inflation, but said he accepted the principles of forward guidance.

The dollar trimmed gains against the Swiss franc, with USD/CHF up just 0.09% to 0.9340.

The greenback was broadly lower against its Australian, New Zealand and Canadian counterparts, with AUD/USD gaining 0.43% to trade at 0.9150, NZD/USD advancing 0.93% to 0.8037 and USD/CAD down 0.18% to 1.0324.

In New Zealand, official data on Wednesday showed that retail sales rose 1.7% in the second quarter, better than expectations for a 1.4% increase, while core retail sales rose by a larger-than-forecast 2.3%.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was 0.12% lower at 81.69. 

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Crude oil futures trim losses after bullish U.S. supply data

Crude oil futures trimmed losses on Wednesday to move off the lowest levels of the session after a report from the U.S. government showed that oil supplies fell more-than-expected last week.

On the New York Mercantile Exchange, light sweet crude futures for delivery in September traded at USD106.49 a barrel during U.S. morning trade, down 0.3%. The September contract settled up 0.7% at USD106.83 a barrel on Tuesday.

Nymex oil prices traded at USD106.37 a barrel prior to the release of the supply data.

Nymex oil futures traded in a range between USD105.95 a barrel, the daily low and a session high of USD106.88 a barrel.

Oil futures were likely to find support at USD103.63 a barrel, the low from August 9 and resistance at USD107.23 a barrel, the high from August 6.

The U.S. Energy Information Administration said in its weekly report that U.S. crude oil inventories fell by 2.8 million barrels in the week ended August 9, compared to expectations for a decline of 1.5 million barrels. 

Total U.S. crude oil inventories stood at 360.5 million barrels as of last week. 

The report also showed that total motor gasoline inventories decreased by 1.2 million barrels, beating expectations for a decline of 0.8 million barrels.

Meanwhile, the U.S. Department of Labor said earlier that producer prices were flat last month, confounding expectations for a 0.3% increase.

The core producer price index eased up 0.1% in July, missing forecasts for a 0.2% increase.

The disappointing data raised fresh doubts over whether the economic recovery is strong enough for the Federal Reserve to begin phasing out its USD85 billion-a-month asset purchase program later this year.

Investors have closely been looking out for U.S. data reports recently to gauge if they will strengthen or weaken the case for the Fed to reduce its bond purchases.

Any improvement in the U.S. economy was likely to reinforce the view that the central bank will begin to taper its bond purchase program in the coming months.

The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

The central bank is scheduled to meet September 17-18 to review the economy and assess policy.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for September delivery inched down 0.2% to trade at USD109.60 a barrel, with the spread between the Brent and crude contracts standing at USD3.11 a barrel.

In the euro zone, preliminary data released earlier showed that the region’s gross domestic product grew by a seasonally adjusted 0.3% in the second quarter, above expectations for growth of 0.2%.

The upbeat data came after a report showed that France’s economy expanded 0.5% in the three months to June, following two consecutive quarters of contraction. Economists had forecast growth of 0.2% quarter-on-quarter.

A separate report showed that Germany’s economy expanded by 0.7% after growing 0.1% in the first quarter. Economists had forecast quarter-on-quarter growth of 0.6%.

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Forex - Euro little changed vs. dollar in subdued trade

The euro was little changed against the dollar on Wednesday after official data showed that U.S. producer price inflation slowed in July and a report earlier in the day showing that the euro zone economy returned to growth in the second quarter.

EUR/USD hit 1.3239 during U.S. morning trade, the session low; the pair subsequently consolidated at 1.3258, dipping 0.03%.

The pair was likely to find support at 1.3200 and resistance at 1.3316, Tuesday’s high.

The euro eased back from session lows after the Department of Labor said U.S. producer prices were flat last month, confounding expectations for a 0.3% increase, after rising 0.8% in June.

The core producer price index eased up 0.1% in July, missing forecasts for a 0.2% increase.

The dollar continued to be supported by the view that the economic recovery is strong enough for the Federal Reserve to begin phasing out its USD85 billion-a-month asset purchase program later this year.

The euro briefly touched session highs earlier after data showed that the euro zone’s economy emerged from an 18-month recession in the three months to June.

Eurostat said the bloc’s economy expanded by 0.3%, the fastest quarterly expansion since the first quarter of 2011. Economists had expected quarter-on-quarter growth of 0.2%. 

France’s economy expanded 0.5% in the three months to June, following two consecutive quarters of contraction, while Germany’s economy expanded by a larger than forecast 0.7%.

Elsewhere, the single currency was lower against the broadly stronger pound, with EUR/GBP down 0.51% 0.8540.

Sterling was boosted after Bank of England minutes showed that policymakers were divided on forward guidance and a separate report showed that the U.K. unemployment rate was unchanged in June. 

The Office of National Statistics said the U.K. unemployment rate remained unchanged at 7.8% in June, in line with expectations. The number of people claiming unemployment benefits fell by 29,200 in July, better than expectations for a decline of 15,000.

Separately, the minutes of the BoE’s July meeting showed that the decision to provide forward guidance on future rate increases was not unanimous.

Monetary Policy Committee member Martin Weale wanted tougher measures to ensure that the pledge to hold rates at record lows did not lead to a pickup in inflation, but said he accepted the principles of forward guidance.

The minutes showed that policymakers voted unanimously in favor of keeping the bank rate steady at 0.5% and the asset purchase program unchanged at GBP375 billion.

The euro was also lower against the yen, with EUR/JPY slipping 0.09% to 130.12.

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Forex - GBP/USD holds gains as BoE, U.K. data support

The pound held gains against the U.S. dollar on Wednesday, as the minutes of the Bank of England's latest policy meeting and positive U.K. unemployment data continued to support demand for the greenback. 

GBP/USD hit 1.5538 during U.S. morning trade, the pair's highest since August 9; the pair subsequently consolidated at 1.5533, gaining 0.55%. 

Cable was likely to find support at 1.5421, the session low and resistance at 1.5557, the high of August 8.

The pound strengthened earlier, after the Office of National Statistics said the U.K. unemployment rate remained unchanged at 7.8% in June, in line with expectations. The number of people claiming unemployment benefits fell by 29,200 in July, better than expectations for a decline of 15,000.

Separately, the minutes of the BoE’s July meeting showed that the decision to provide forward guidance on future rate increases was not unanimous.

Last week the BoE announced plans to keep interest rates on hold at record lows as long as the U.K. unemployment rate remains above 7%.

The BoE set out three conditions under which forward guidance on rates would not apply. One of these says bank will consider raising rates if medium term inflation expectations rise above 2.5% over 18 to 24 months.

Monetary Policy Committee member Martin Weale wanted tougher measures to ensure that the pledge to hold rates at record lows did not lead to a pickup in inflation, but said he accepted the principles of forward guidance. 

Meanwhile, the greenback came under pressure after the U.S. Department of Labor said producer prices were flat last month, confounding expectations for a 0.3% increase, after rising 0.8% in June. The core producer price index eased up 0.1% in July, missing forecasts for a 0.2% increase.

The disappointing data raised fresh doubts over whether the economic recovery is strong enough for the Federal Reserve to begin phasing out its USD85 billion-a-month asset purchase program later this year. 

Sterling was higher against the euro with EUR/GBP declining 0.55%, to hit 0.8537. 

Also Wednesday, Eurostat said the euro zone’s economy expanded by 0.3% in the three months to June. Economists had expected quarter-on-quarter growth of 0.2%.

Separately, preliminary data showed that France’s economy expanded 0.5% in the second quarter, following two consecutive quarters of contraction. Economists had forecast growth of 0.2% quarter-on-quarter.

Germany’s economy expanded by 0.7% after growing 0.1% in the first quarter. Economists had forecast quarter-on-quarter growth of 0.6%.

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