NEW YORK, Sept 13 – The dollar index reversed course and rose sharply on Tuesday as U.S. stocks sank and Treasury yields advanced on news that U.S. consumer prices rose faster than expected in August, prompting bets on more aggressive interest rate hikes by the Federal Reserve.
* Oil futures gave back earlier gains in volatile trading after falling gasoline prices in August were offset by rising rent and food costs.
* The Consumer Price Index advanced 0.1% last month, versus expectations for a 0.1% decline and after being unchanged in July, the Labor Department said.
* US stock indices had risen a day earlier and also gained ground last week as investors bet on a report showing some moderation in inflation.
* “With the rally last week and yesterday, the market risk reward going into this report was a bit skewed to the downside anyway, even though we would have had a report online or somewhat below expectations This report was a negative surprise with higher inflation,” said Mona Mahajan, senior investment strategist at Edward Jones.
* “It’s been another disappointment. It’s the old Charlie Brown analogy. Every time we’re ready to kick the ball, he walks away from us,” she added.
* As of 1533 GMT, Wall Street’s main indices were down between 2.5% and 4%. The pan-European STOXX 600 was down 1.48% and MSCI’s global stock measure was down 2%.
* In currencies, the dollar index gained 0.97% and the euro fell 0.85% to $1.0033. The yen was down 0.84% at 144.05 per dollar, while the British pound was down 0.99% at $1.1563. The Mexican peso subtracted 0.94%, 20.03 units per dollar.
* The yield on US Treasuries advanced and inversion of a closely watched part of the yield curve widened after inflation data also contradicted expectations of investors in government debt.
* The benchmark 10-year notes yielded 19/32 in price, yielding 3.4351%; 30-year papers fell 24/32 in price, with a return of 3.5558%; and the two-year debt was down 10/32 in price, at 3.7371%.
* The spread between two-year and 10-year bond yields, seen as a harbinger of recession, stood at -27.3 basis points.
* Crude oil prices fell between 0.6% and 1% after the inflation data.
Spot gold, meanwhile, fell 1.1% to $1,704.50 an ounce, and US gold futures fell 1.37% to $1,704.50.