GLOBAL MARKETS-Stocks rise on tame U.S. inflation data

Reuters: [2008-05-14 22:14:00]

(Adds close of U.S. markets)

* Benign U.S. inflation reading for April buoys sentiment

* Oil falls from recent record highs as inventories rise

* Yen falls as U.S. consumer price data boost risk demand

By Herbert Lash

NEW YORK, May 14 (Reuters) - U.S. stocks rallied on Wednesday as a tame U.S. inflation report eased worries that the Federal Reserve may soon hike interest rates to curb rising consumer prices, lifting investors' appetite for risk.

The smaller-than-expected 0.2 percent rise in U.S. consumer prices in April soothed concerns about surging inflation and drove up the price of longer-maturity U.S. government debt. Inflation erodes the value of bonds over time.

The yen fell broadly as the Consumer Price Index report raised risk appetites and was seen giving the Federal Reserve flexibility to deal with the downturn in the United States, world's biggest economy.

Oil eased from record highs near $127 a barrel set on Tuesday after Iran assured it had no plans to cut exports and U.S. inventory showed a rise in the supply of distillates.

The prospect of steady to lower borrowing costs lifted shares of U.S. financial companies, home builders and retailers.

"The big news is that the CPI, both overall and core, were better than expected," said Al Goldman, chief market strategist at Wachovia Securities in St. Louis. "That dispelled a lot of concern by people who were afraid that inflation was going to run wild and the Fed would have to jack up interest rates."

The Dow Jones industrial average <.DJI> was up 66.20 points, or 0.52 percent, at 12,898.38. The Standard & Poor's 500 Index <.SPX> was up 5.62 points, or 0.40 percent, at 1,408.66. The Nasdaq Composite Index <.IXIC> was up 1.58 points, or 0.06 percent, at 2,496.70.

Stocks, however, ended sharply off earlier highs that had sent the Dow up as much as around 150 points. A 2.0 percent decline in shares of iPod maker Apple <AAPL.O> weighed on the Nasdaq.

However, stronger-than-expected results from department store operator Macy's Inc <M.N> and a smaller than-expected loss from home finance company Freddie Mac <FRE.N>, a barometer for the U.S. housing crisis, helped buoyed sentiment.

Shares of Freddie jumped 9.2 percent to $27.25, while shares of Macy's rose 3.6 percent to $24.93.

The pullback in oil prices also boosted shares of big manufacturers such as 3M Co <MMM.N>, whose stock was among the Dow's top advancers. 3M shares rose 0.7 percent to $77.73.

The April CPI reading helped calm investors a day after several key Fed officials had voiced concerns about inflationary pressures following the surge in oil prices to a series of fresh record highs in recent days.

"It's clearly not the world reality, but to the extent the Fed follows this data, it makes the case that the Fed is not going to be ratcheting up rates any time soon," said Michael Darda, chief economist at MKM Partners LLC, in Greenwich, Connecticut.

European shares ended higher, also boosted by the tame U.S. CPI report and as strong earnings reports raised investor optimism.

Airbus parent EADS <EAD.PA> rose 5.9 percent after it posted quarterly profits that were stronger than expected and stuck to its forecast for the year despite fresh delays to its A380 superjumbo jet.

BNP Paribas <BNPP.PA>, France's biggest listed bank, and Dutch financial services group ING Groep <ING.AS> also rose after their results beat most analysts' expectations.

BNP rose 4.9 percent, and ING gained 3.9 percent.

The FTSEurofirst 300 <.FTEU3> index of top European shares ended 0.6 percent higher at 1,354.70 points, its highest close in nearly a week.

BHP Billiton <BHP.AX><BLT.L>, the world's biggest mining company, rose 4.9 percent, fueled by speculation that a state-controlled Chinese firm was building a stake. Much of the speculation centered on giant Chinese aluminum maker Chinalco, already the largest shareholder in mining group Rio Tinto <RIO.L>.

Oil prices fell even as the latest weekly U.S. fuel inventory data was mixed, with a rise in crude oil and distillate stocks but a surprise fall in gasoline.

U.S. crude <CLc1> settled $1.58 lower at $124.22, after hitting an all-time high of $126.98 a barrel on Tuesday. London Brent crude <LCOc1> settled down $2.24 at $121.86 a barrel.

Oil prices have rallied on concerns about global distillate supplies this month, amid signs of rising diesel demand for power generation in some emerging economies.

U.S. Treasury debt prices were mixed. The benchmark 10-year U.S. Treasury note <US10YT=RR> was unchanged with the yield at 3.91 percent. The 2-year U.S. Treasury note <US2YT=RR> fell 3/32 to yield 2.52 percent. The 30-year U.S. Treasury bond <US30YT=RR> rose 11/32 to yield 4.61 percent.

In currency markets, the unexpectedly slower increase in the consumer price index briefly caused traders to sell the dollar, but analysts said it did not alter market views the Federal Reserve interest-rate-cutting campaign was almost over.

The euro <EUR=> rose 0.02 percent at $1.5461, and against the yen the dollar <JPY=> rose 0.30 percent at 105.09.

The dollar rose against major currencies, with the U.S. Dollar Index <.DXY> up 0.10 percent at 73.37.

Sterling slumped to a near three-month low against the dollar after the Bank of England, in its quarterly inflation report, said British prices would shoot up this year, which many believe may delay interest rate cuts. Sterling last traded flat at $1.9946 <GBP=>.

U.S. gold futures ended slightly down as lower crude oil prices damped sentiment, but expected dollar weakness could still lift bullion in the near term.

The June contract <GCM8> for gold in New York settled down $3.10 at $866.50 an ounce.

Asian stocks staged a late surge on Wednesday to take the Tokyo and Sydney markets to four-month closing highs.

The Nikkei average <.N225> rose 1.2 percent for its highest close since January, while other Asian stocks <.MIAPJ0000PUS> were steady.

Sydney's S&P/ASX 200 index <.AXJO> rose 1 percent to a four-month closing high as resources firms, led by BHP, enjoyed high oil and metals prices.

(Reporting by Ellis Mnyandu, John Parry and Lucia Mutikani in New York, Jane Merriman and Lewa Pardomuan in London and Blaise Robinson in Paris; Editing by Leslie Adler) ((herb.lash@thomsonreuters.com; +1 646 223 6019; Reuters Messaging: herb.lash.reuters.com@reuters.net)) ((Multimedia versions of Reuters Top News are now available

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GLOBAL MARKETS-Stocks rise on benign U.S. inflation report

Reuters: [2008-05-14 19:01:00]

(Recasts with U.S. markets, adds byline; changes dateline; previous LONDON)

* Stocks rise on benign U.S. inflation reading for April

* Oil falls from recent record highs as crude stocks rise

* Yen falls as U.S. consumer price data boost risk demand

By Herbert Lash

NEW YORK, May 14 (Reuters) - U.S. and European stocks rose on Wednesday as a tame U.S. consumer inflation report eased worries that the Federal Reserve might have to raise interest rates to curb inflation, raising investors' appetite for risk.

The smaller-than-expected 0.2 percent increase in U.S. consumer prices in April soothed concerns about surging inflation and drove up the price of longer-maturity U.S. government debt, which is sensitive to inflation expectations that erode bond values over time.

The yen fell broadly as the Consumer Price Index report raised risk appetites and was seen giving the Federal Reserve flexibility to deal with the downturn in the United States, world's biggest economy.

Crude oil prices eased off this week's record highs.

The prospect of steady to lower borrowing costs lifted shares of U.S. financial companies, home builders and retailers.

"The big news is that the CPI, both overall and core, were better than expected," said Al Goldman, chief market strategist at Wachovia Securities in St. Louis. "That dispelled a lot of concern by people who were afraid that inflation was going to run wild and the Fed would have to jack up interest rates."

After midday, the Dow Jones industrial average <.DJI> was up 110.00 points, or 0.86 percent, at 12,942.18. The Standard & Poor's 500 Index <.SPX> was up 11.60 points, or 0.83 percent, at 1,414.64. The Nasdaq Composite Index <.IXIC> was up 21.98 points, or 0.88 percent, at 2,517.10.

Stronger-than-expected results from department store operator Macy's Inc <M.N> and a smaller than-expected loss from home finance company Freddie Mac <FRE.N>, a barometer for the U.S. housing crisis, also buoyed sentiment.

The pullback in oil prices also helped shares of big manufacturers such as 3M Co <MMM.N>, whose stock was among the Dow's top advancers. 3M shares rose 1.3 percent to $78.20.

Advancers beat decliners by almost three-to-one on the New York Stock Exchange.

European shares ended higher as the tame U.S. CPI report eased worries that the Fed might have to raise rates and strong earnings reports raised investor optimism.

Airbus parent EADS <EAD.PA> rose 5.9 percent after it posted quarterly profits that were stronger than expected and stuck to its forecast for the year despite fresh delays to its A380 superjumbo jet.

BNP Paribas <BNPP.PA>, France's biggest listed bank, gained 5 percent after it posted results that beat most analysts' expectations.

Dutch financial services group ING Groep <ING.AS> rose 3.9 percent after reporting first-quarter results with production above analysts' forecasts.

The FTSEurofirst 300 <.FTEU3> index of top European shares ended 0.6 percent higher at 1,354.70 points, its highest close in nearly a week.

BHP Billiton <BHP.AX><BLT.L>, the world's biggest mining company, rose 4.9 percent, fueled by speculation that a state-controlled Chinese firm was building a stake. Much of the speculation centered on giant Chinese aluminum maker Chinalco, already the largest shareholder in mining group Rio Tinto <RIO.L>.

Oil rose from session lows after crude oil stocks climbed less than expected in the United States, the world's top consumer.

The latest weekly U.S. fuel inventory data was mixed, with a rise in crude oil and distillate stocks but a surprise fall in gasoline.

U.S. light crude for June delivery <CLc1> fell 59 cents at $125.21. It has hit a string of record highs over the past week and reached a peak of $126.98 a barrel on Tuesday.

London Brent crude <LCOc1> declined $1.40 at $122.70 a barrel.

U.S. Treasury debt prices were mixed. Longer-dated bonds rose on the modest inflation reading, while the increased appetite for riskier assets such as corporate bonds and U.S. stocks pulled shorter maturity prices slightly lower.

The benchmark 10-year U.S. Treasury note <US10YT=RR> rose 1/32 to yield 3.91 percent. The 2-year U.S. Treasury note <US2YT=RR> fell 2/32 to yield 2.50 percent. The 30-year U.S. Treasury bond <US30YT=RR> rose 11/32 to yield 4.61 percent.

The dollar was break-even against major currencies, with the U.S. Dollar Index <.DXY> little changed at 73.299.

The euro <EUR=> rose 0.14 percent at $1.548, and against the yen, the dollar <JPY=> rose 0.36 percent at 105.16.

Spot gold prices <XAU=> rose $1.95, or 0.23 percent, to $867.75.

Asian stocks staged a late surge on Wednesday to take the Tokyo and Sydney markets to four-month closing highs.

The Nikkei average <.N225> rose 1.2 percent for its highest close since January, while other Asian stocks <.MIAPJ0000PUS> were steady.

Sydney's S&P/ASX 200 index <.AXJO> rose 1 percent to a four-month closing high as resources firms, led by BHP, enjoyed high oil and metals prices. (Reporting by Ellis Mnyandu, John Parry and Lucia Mutikani in New York, Jane Merriman and Lewa Pardomuan in London and Blaise Robinson in Paris; Editing by Leslie Adler) ((herb.lash@thomsonreuters.com; +1 646 223 6019; Reuters Messaging: herb.lash.reuters.com@reuters.net)) ((Multimedia versions of Reuters Top News are now available

for: * 3000 Xtra: visit

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* BridgeStation: view story .134

For more information on Top News:

http://topnews.reuters.com)) Keywords: MARKETS GLOBAL

GLOBAL MARKETS-Dlr wipes gains, stocks rise after U.S. CPI

Reuters: [2008-05-14 16:01:00]

(Adds quotes, update prices)

By Veronica Brown

LONDON, May 14 (Reuters) - Stocks rallied and the dollar lost ground on Wednesday after U.S. consumer prices rose less than expected, injecting a hint of doubt into expectations that the Federal Reserve will pause its cycle of interest rate cuts.

U.S. consumer prices rose a smaller-than-expected 0.2 percent in April as energy prices held steady, a Labor Department report showed.

The rise was less than the 0.3 percent gain Wall Street analysts polled by Reuters were expecting after a 0.3 percent advance in March. Core prices, which exclude volatile food and energy costs, were up just 0.1 percent, half the increase analysts had forecast.

The CPI reading led U.S. interest rate futures to show briefly a 10 percent chance of a 25 basis point rate cut at the next Fed meeting in June, following 325 basis points' worth of cuts since September aimed at helping to offset damage to U.S. growth caused by the credit crunch.

"It takes a little bit of pressure off the Federal Reserve as some hope that inflation pressures are contained. It's bearish for the U.S. dollar. It allows the Fed to do what it feels it has to do to sustain growth later this year," said David Watt, senior currency strategist at RBC Capital Markets in Toronto.

U.S. stocks rose at the market open. The Dow Jones industrial average <.DJI> was up 39.49 points, or 0.31 percent, at 12,871.67. The Standard & Poor's 500 Index <.SPX> was up 5.22 points, or 0.37 percent, at 1,408.26.

The dollar lost its earlier gains against the euro <EUR=>, leaving the common currency steady on the day at $1.5463, while the FTSEurofirst 300 index of top European shares <.FTEU3> was up 0.4 percent at 1,352.27 points.

Benchmark 10-year notes <US10YT=RR> were last up 6/32 in price for a yield of 3.90 percent, down from 3.91 percent late Tuesday. Shortly before the government released the CPI data, they were down 12/32 in price for a 3.96 percent yield.

HEADWINDS

The dollar's losses gave a brief lift to gold, which is often seen as a hedge against inflationary pressures, while oil <CLc1> remained weaker after hitting a record $126.98 a barrel this week.

While some people were hoping that U.S. inflation pressures had been contained, the picture in the UK looked more complicated after a Bank of England report highlighted the dilemma facing policymakers charged with navigating through rising prices and slower growth.

Sterling hit a three month low versus the dollar after the BoE's quarterly report showed inflation staying above target for some time to come and economic growth slowing sharply.

Analysts say the two conflicting forces could limit the scope for future interest rate cuts, potentially further hurting the economy and thus sterling.

"Overall the report makes very bearish reading really as far as sterling is concerned with the higher inflation and the weak growth picture as well," said Ian Stannard, senior FX strategist at BNP Paribas.

Sterling fell as low as $1.9366 <GBP=>, its weakest since Feb. 20. A move below $1.9335 would take it beyond this year's lows, to levels not seen since March 2007.

(Reporting by Veronica Brown; Editing by David Stamp)

((RM:veronica.brown.reuters.com@reuters.net; Tel: +44 207 542 6745))

Keywords: MARKETS GLOBAL

GLOBAL MARKETS-Dlr wipes gains, stocks rise after U.S. CPI

Reuters: [2008-05-14 14:58:00]

LONDON, May 14 (Reuters) - Stock markets rose, while the dollar lost its early gains and bonds cut losses on Wednesday after U.S. consumer prices rose less than expected, injecting a hint of doubt into expectations of a pause in Fed interest rate cuts.

U.S. consumer prices rose a smaller-than-expected 0.2 percent in April as energy prices held steady, a Labor Department report showed.

The rise was less than the 0.3 percent Wall Street analysts polled by Reuters were expecting after a 0.3 percent advance in March. So-called core prices, which exclude volatile food and energy, were up just 0.1 percent, half the increase analysts had forecast.

The disappointing CPI reading led U.S. interest rate futures to show briefly a 10 percent chance of a 25 basis point rate cut at the next Fed meeting in June, following 325 basis points' worth of cuts since September aimed at helping to offset damage to U.S. growth caused by the credit crunch.

"These numbers will spark some doubt as to whether Fed easing is truly over. They seem to leave the door open for further rate cuts," said Ashraf Laidi, chief market analyst at CMC markets in New York.

By 1240 GMT, the dollar had lost its earlier gains against the euro <EUR=>, leaving the common currency up 0.1 percent on the day at $1.5479, while the FTSEurofirst 300 <.FTEU3> index of top European shares was up 0.4 percent at 1,351.69 points.

Bund futures pared losses, while U.S. stock market futures turned higher with S&P 500 futures <SPc1> up 3.9 points, above fair value -- a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Benchmark 10-year notes <US10YT=RR> were last down 2/32 in price for a yield of 3.92 percent. Prior to the CPI data, they were down 12/32 for a 3.96 percent yield.

The dollar's losses also helped gold prices to rally <XAU=>.

(Reporting by Veronica Brown; Editing by David Stamp)

((RM:veronica.brown.reuters.com@reuters.net; Tel: +44 207 542 6745))

Keywords: MARKETS GLOBAL

GLOBAL MARKETS-Equities climb, attention shifts to inflation

Reuters: [2008-05-14 10:28:00]

By Jeremy Gaunt, European Investment Correspondent

LONDON, May 14 (Reuters) - Equity markets climbed, the dollar stayed firm and bond prices fell on Wednesday as worries about U.S. economic growth eased and attention turned to inflation.

The broad drivers of world markets were Tuesday's better-than-expected U.S. retail sales data and concerns expressed by Federal Reserve officials about inflationary pressure.

Together, the two suggest the Fed will not cut interest rates again next month.

"Inflation is the main draw today," said one bond trader in London.

On that front, U.S. consumer price data was due later on Wednesday (1230 GMT) while oil was falling back from near $127 a barrel record highs.

U.S. light crude for June delivery <CLc1> was down 34 cents $125.45 a barrel. It surged to a seventh consecutive record high on Tuesday, hitting $126.98 a barrel before profit-taking pared the gains.

European shares put in a solid performance, led by banks and miners, while aerospace and defence group EADS <EAD.PA> jumped after posting strong results.

The FTSEurofirst 300 <.FTEU3> index of top European shares was up 0.6 percent.

Earlier, Japan's Nikkei stock average <.N225> rose 1.2 percent to a four-month closing high. But there were concerns about inflation.

"Inflation fears have been prompted by high oil prices, and some people are also waiting to see what the economic impact of the Chinese earthquake might be," said Yumi Nishimura, a manager at the investment advisory section of Daiwa Securities SMBC.

The Nikkei gained 164.82 points to 14,118.55, its highest close since Jan. 11. The broader TOPIX <.TOPX> rose 1 percent to 1,373.04.

DOLLAR CLIMBS

The dollar broadly firmed, building on gains made after the U.S. retail data and inflation comments.

Cleveland Fed President Sandra Pianalto said core inflation measures were rising faster than she liked and called inflation "a key risk".

The dollar was up 0.3 percent on the day at 105.16 yen <JPY=>, while the euro fell 0.3 percent to $1.5414 <EUR=>.

Euro zone government bonds were lower after losses to U.S. Treasuries and inflation worries growing.

The interest rate-sensitive two-year Schatz yield <EU2YT=RR> was up 6.8 basis points at 3.891 percent. Bond prices move inversely to yields.

The 10-year Bund yield <EU10YT=RR> was up 6.3 basis points at 4.157 percent. ((jeremy.gaunt@reuters.com; +44 207 542 1028; Reuters Messaging: jeremy.gaunt.reuters.com@reuters.net; editing by Chris Pizzey))

Keywords: MARKETS GLOBAL