The dollar weakened, and U.S. stock indexes showed mixed results on Tuesday following the release of U.S. consumer inflation data that came in lower than expected for April. This comes after President Donald Trump's announcement of significant tariffs, which have contributed to global market instability.
In a more positive development, the U.S. and China announced on Monday that they would pause their trade war for 90 days, easing reciprocal tariffs and other trade barriers while negotiations for a more permanent agreement continue. This trade truce has sparked renewed optimism among investors, driving interest in stocks, commodities, and cryptocurrencies. Tuesday’s inflation data further bolstered this sentiment.
The MSCI global stock index rose by 0.61%, reflecting a global boost in investor confidence. Meanwhile, the U.S. Bureau of Labor Statistics reported that the Consumer Price Index (CPI) increased by just 0.2% in April, bringing the annual rate down to 2.3% from 2.4%. This was below economists’ forecast of a 0.3% monthly increase and 2.4% yearly rise, signaling that inflation remains under control. Bill Adams, Chief Economist at Comerica Bank, described the report as “good news” for both consumers and businesses looking ahead.
On Wall Street, the Dow Jones Industrial Average fell by 0.31%, while the S&P 500 gained 0.71%, and the Nasdaq Composite rose 1.38%. The dollar also extended its losses, falling 0.29% against a basket of currencies, with the euro climbing to a high of $1.113.
The release of the inflation report suggests that the Federal Reserve may remain cautious in its approach to interest rates, according to Peter Cardillo, Chief Market Economist at Spartan Capital. Traders have reduced their expectations for a rate cut, anticipating fewer than 60 basis points of cuts this year, down from expectations of over 100 basis points in April when fears about the tariffs’ impact were more pronounced.
Despite the temporary reduction in tariffs, analysts caution that the broader economic challenges remain. Christopher Hodge, Chief U.S. Economist at Natixis, warned that even with a pause in trade hostilities, the long-term impact of high tariffs on U.S. growth persists. The effective U.S. tariff rate stands at 13.1%, according to Fitch, significantly lower than before the tariff agreement but still at levels not seen since 1941.
In other markets, U.S. Treasury yields saw mixed movements, with the benchmark 10-year yield rising 2.2 basis points to 4.479%, while the 2-year yield, more sensitive to interest rate changes, declined slightly. In commodities, gold saw modest gains, with spot gold up 0.31%, and Brent crude futures increased by 1.49%, reflecting an uptick in global oil prices.