Inflation concerns and Cisco Weigh on U.S. Markets (07-05-2008)

Despite the fact that oil prices are rising and financial companies continue to post losses, investors chose to disregard these facts on Tuesday and propelled Wall Street indices to close higher. The negative start gave way to substantial gains, and the Dow closed at 13,020.83 up by 0.40% 

In the Asia Pacific region, most indices closed lower, except the Nikkei 225 in Japan and the TAIEX in Taiwan. Whereas banks helped support the Japanese market, in China banks were hardest hit on bets that the central bank will lift interest rates next week after the release of April’s consumer price data. Throughout the region, energy sensitive stocks helped pare losses and boosted gains. Staples’ prices continue to rise, especially after the devastating cyclone in Myanmar. 

The U.S. dollar gained against the euro following comments from the Kansas City Fed chairman that inflation is becoming a serious concern and may cause the Federal Reserve to eventually raise rates. Also, oil prices reached another record to just shy of $123 per barrel before stabilizing at $121.84.

European stock markets were gaining between 0.50 and 1% by 10:30 GMT on a variety of shares as the energy sector gave strong results, banks rallied and insurers recovered from earlier losses. 

Futures in U.S. markets displayed a degree of jitters largely due to inflation concerns after the Kansas City Fed chairman’s comments as well as a cautious outlook from tech giant Cisco Systems that reported better than expected sales and earnings but gave a cautious outlook. On the data front, investors today expect readings on labor costs and energy inventories

Source ISFM