US stocks declined and the dollar strengthened on Thursday after new economic data added to investor concerns that interest rates are set to remain higher than previously forecast.
Wall Street’s benchmark S&P 500 fell 0.2 percent and the tech-heavy Nasdaq Composite fell 0.6 percent after U.S. jobless claims fell to 190,000 in the week ended Feb. 25, short of the 195,000 forecast. Tesla shares fell 6.4 percent after the company failed to specify when the new model would be launched or its price.
US government bonds continued to decline, with the yield on the two-year Treasury – the bond most sensitive to inflation – rising 0.03 percentage points to 4.91 percent, the highest since 2007. The yield on the benchmark 10-year Treasury rose 0.08 percent. points for 4.07 percent.
A measure of the dollar’s strength against its six peers gained 0.5 percent.
The move comes after a tumultuous few weeks for investors hoping central bank interest rates on both sides of the Atlantic are close to peaking.
“Attitudes are in the dumps,” said Mike Zigmont, head of trading and research at Harvest Volatility Management. “We haven’t had a positive data point or headline for a long time and are waiting to weigh in on stocks and bonds.”
Signs of continued tightening in the US labor market, which raised the possibility of higher interest rates, followed a smaller-than-expected fall in euro zone inflation, with prices in the bloc rising 8.5 percent in February year-on-year . This was down from 8.6 percent in January but more than the 8.2 percent forecast by economists polled by Reuters.
Core inflation, which strips out volatile food and energy to give a clearer picture of underlying price pressures, rose to a new euro zone record of 5.6 percent, up from 5.3 percent the previous month. Economists expect the figure to rise to 5.5 percent.
Stronger-than-expected inflation data from Germany, Spain and France earlier this week meant that “the surprise factor for the big numbers in the euro zone numbers has been dampened”, said Tim Graf, head of European macro strategy at State Street Global Markets.
Europe’s Stoxx 600 rebounded from earlier losses to close 0.5 percent higher. London’s FTSE 100 rose 0.3 percent.
February’s inflation figures are still increasing pressure on the European Central Bank to continue raising interest rates next month.
“We have estimated a [half percentage point] walk in [ECB’s] meeting in two weeks and another in May, but further increases in later meetings now seem increasingly likely,” said Jack Allen-Reynolds, deputy chief economist of the eurozone at Capital Economics.
Separate data on Thursday showed the euro zone unemployment rate was unchanged at 6.7 percent.
Asian markets declined on Thursday as investors weighed down optimism about China’s economic recovery that had boosted equities to strong gains a day earlier. Hong Kong’s Hang Seng index lost 0.9 percent while Japan’s Topix declined 0.15 percent and China’s CSI 300 fell 0.2 percent.