US dollar rises on positive US economic data

Global equities fell and the US dollar advanced on Wednesday after stronger-than-expected economic data helped assuage concerns of high inflation and an impending recession driven partly by rising oil prices.

The data released by the Institute for Supply Management (ISM) showed US manufacturing activity picked up in May as demand for goods remained strong even amid rising prices. The survey followed data released last Friday showing US consumer spending, the largest contributor to American economic output, increased strongly in April, notwithstanding growing concerns of an imminent recession.

But market sentiment has remained bearish owing to the prevailing uncertainty caused by the pace of the US Federal Reserve’s interest rate hikes, and the impact of the Russia-Ukraine war on food and commodity prices.

The US dollar rose against the euro, helped by upbeat US economic data, and as the common currency remained under pressure following the hottest euro zone inflation on record that raised worries about the region’s growth outlook.

The dollar index rose 0.835%, with the euro down 0.86% to $1.0641.

US Treasury yields rose in choppy trading, as concerns about recession hitting the world’s largest economy have eased with the Federal Reserve still on course to undertake aggressive tightening this year.

Benchmark US 10-year yields hit a two-week high of 2.9368%, while two-year yields also climbed to a two-week peak of 2.668%.

There is a lot of uncertainty. The market climbs a wall of worry and there’s a lot to worry about. If Americans have a recession, it would be strange and unusual with nearly full employment, companies still hiring and huge demand for things. The MSCI world equity index, which tracks shares in 50 countries, was down 1.13%. The pan-European STOXX 600 index fell 1.04%.

On Wall Street, all three main indexes were trading lower, driven by stocks in the financials, healthcare, technology and consumer discretionary sectors. The Dow Jones Industrial Average fell 1.16% to 32,608.37, the S&P 500 lost 1.31% to 4,077.83 and the Nasdaq Composite dropped 1.37% to 11,916.38.