US stocks rise, dollar higher before Fed meeting

Bloomberg

US stocks gained, the dollar advanced and Treasuries slipped after data showed signs of inflation in producer prices as the Federal Reserve starts its two-day meeting.
The S&P 500 Index edged higher after closing at a record, and the other major US equity gauges were up. Telephone shares led gainers, and semiconductor stocks led decliners. European equities pushed to a five-week high amid a $5 billion deal in the tech sector. The euro weakened and most European bonds declined as German investor confidence slid in December for the first time in four months.
“PPI final demand prices are rising 3 percent, and this will give Fed officials that are cautious on the inflation outlook the confidence to raise rates this week knowing that core consumer inflation will start moving back up to its 2 percent target,” Chris Rupkey, chief financial economist at MUFG Union Bank, wrote. “Let’s not forget that core PCE inflation was 1.9 percent as recently as February at the start of the year, before those idiosyncratic one-offs in the prices of some goods slowed it down for a while. Basically, it was the cell phones in your pockets and purses that, believe it or not, are cheaper than you thought and have dragged down consumer inflation.”
Brent crude jumped above $65 a barrel for the first time since June 2015 after one of the most important pipelines in the world was shut because of a crack, while WTI crude slid below $58 a barrel. UK natural gas prices surged after a pipeline explosion in Austria threatened to tighten flows. Gold traded near a five-month low while most industrial metals declined.
Trading remained lackluster with volume on the S&P 500 about 10 percent below normal for this time of day as investors awaited the year’s final central bank policy moves. The Federal Reserve is expected to raise rates at its meeting on Wednesday and the ECB to reveal details of plans to taper asset purchases on Thursday. The BOE and Swiss National Bank also meet. Comments from officials on the outlook for 2018 will be in focus, as investors weigh the impact of coming policy normalisation on global asset markets.
Fed policy makers announce their decision on Wednesday. The ECB, Bank of England and Swiss National Bank set monetary policy at their respective meetings on Thursday. Among top US economic reports are consumer inflation on Wednesday and retail sales on Thursday. European lawmakers continue to debate Brexit and weigh moves on the next step, while North America Free Trade Agreement negotiators meet again.
The S&P 500 rose 0.2 percent at 10:36 am in New York. The Stoxx Europe 600 Index jumped 0.5 percent to the highest in almost five weeks. The UK’s FTSE 100 Index climbed 0.2 percent to the highest in more than a month. The MSCI Asia Pacific Index fell 0.4 percent. The MSCI Emerging Market Index dipped 0.8 percent.
The Bloomberg Dollar Spot Index gained 0.3 percent to the highest in a month. The euro fell 0.1 percent to $1.1754, the weakest in three weeks. The British pound climbed 0.2 percent to $1.3365. The Japanese yen gained 0.1 percent to 113.50 per dollar.
The yield on 10-year Treasuries rose one basis point to 2.4119 percent, the highest in more than a week. Germany’s 10-year yield rose one basis point to 0.31 percent, the highest in a week. Britain’s 10-year yield climbed two basis points to 1.224 percent.