European shares gain, Asia mixed ahead of US inflation data

The Labor Department will report consumer inflation for April later Wednesday. Price trends help to shape Federal Reserve policy on interest rate hikes, which in turn can slow economic growth by making borrowing more costly.

Surging inflation is prompting central banks and governments in many countries to rein in support provided to markets and businesses during the height of the pandemic. Investors, in turn, are adjusting their asset allocations to reflect the changing policy landscape.

Germany’s DAX jumped 1.1% to 13,679.24 and the CAC 40 in Paris surged 2.1% to 6,242.50. Britain’s FTSE 100 advanced 1.3% to 7,334.70.

The future for the S&P 500 rose 1.1% and that for the Dow industrials gained 0.9%. Stocks ended mixed on Wall Street Tuesday after a rally in technology companies helped reverse most of an early slide. The S&P 500 wound up 0.2% higher while the Dow Jones Industrial Average fell 0.3%. The Nasdaq composite rose 1%.

Chinese shares rose after the government reported lower-than-expected price increases for the month of April. In annual terms, inflation was at 2.1%. Prices rose 0.4% from the previous quarter.

The moderation of price increases gives authorities more room for stimulus spending to counter the impact of shutdowns in many major cities to fight coronavirus outbreaks.

Hong Kong’s Hang Seng rose 1% to 19,824.57 and the Shanghai Composite index climbed 0.8% to 3,058.70.

“In the context of the inflation landscape elsewhere in the world, China is in a very sweet spot at the moment, markets today are pricing that it gives China’s government room to unleash some juicy stimulus,” Jeffrey Halley of Oanda said in a commentary.

Tokyo’s Nikkei 225 added 0.2% to 26,213.64, while the S&P/ASX 200 edged 0.2% higher to 7,064.70. In Seoul, the Kospi slipped 0.2% to 2,592.27.

The Labor Department’s report on consumer prices is expected to show price increases slowed in April. On Thursday, the government will release its April report on producer prices, or wholesale prices that impact businesses.

“Some wait-and-see is largely in place, as participants refrain from taking on excessive risks while awaiting how markets will react to the expected decline in US CPI –- the first in seven months,” Jun Rong Yeap of IG said in a commentary.

The yield on the 10-year Treasury fell to 2.93% from 2.99% late Tuesday.

Treasury yields have been rising and stocks have been extremely volatile recently as Wall Street adjusts to the central bank’s moves to raise interest rates from historic lows to fight persistently rising inflation, which is at its highest levels in four decades.

The central bank has raised its benchmark rate from close to zero, where it sat for much of the coronavirus pandemic. Last week, it indicated it will double the size of future increases.

Higher prices on raw materials, shipping and labor have been cutting into corporate financial results and forecasts. Many companies have been raising prices on everything from clothing to food, raising concerns that consumers will eventually cut spending, which would hurt economic growth.

Russia’s ongoing invasion of Ukraine has pushed already high oil and natural gas prices even higher, while putting more pressure on costs for key food commodities like wheat, Wheat prices are up more than 40% for the year.

U.S. crude oil prices are up about 36% in 2022. The U.S. benchmark gained $3.49 to $103.25 per barrel Wednesday in electronic trading on the New York Mercantile Exchange. It fell 3.2% on Tuesday.

Brent crude, the basis for pricing oil in international trading, jumped $3.51 to $105.97 per barrel.

In currency dealings, the dollar slipped to 129.66 Japanese yen from 130.43 yen. The euro rose to $1.0576 from $1.0532.