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US stocks fell on Tuesday as traders reacted to the latest rise in oil prices and also prepared for a rush of monetary policy announcements from central banks around the world.
Wall Street’s S&P 500 fell 0.3 percent in early afternoon trading in New York, with energy and industrials identified as the benchmark’s worst-performing sectors. The technology stock exchange Nasdaq Composite fell 0.3 percent.
Oil prices hit a session high before the New York opening bell on Tuesday and began a retreat, with US oil and gas stocks then following the downward move as the regular trading session continued on Wall Street.
Stock market moves anticipated Wednesday’s US Federal Reserve policy decision, with markets pricing in a 99 percent chance that interest rates would remain unchanged.
More important to investors will be what rate setters say about the November meeting, as well as Fed officials’ outlook for short-term interest rate expectations. Britain, Switzerland and Japan are among the other countries whose central banks will announce policy decisions this week.
“Inflation has proven tricky and central bankers are in a less than easy position,” said Danni Hewson, head of financial analysis at AJ Bell.
“Go too far and they risk undermining their respective economies. If you don’t go far enough, they run the risk of breaking down the door and raising prices.”
The latest data on the U.S. Consumer Price Index reinforced concerns that the Fed’s latest efforts to return inflation to its 2 percent target could take longer than expected. Rising energy costs pushed the increase in the CPI figure to 3.7 percent in August, above economists’ expectations.
A measure of the dollar’s strength against six other currencies fell 0.1 percent.
Brent crude, the international benchmark, extended gains in a fourth straight trading session, rising above $95 for the first time since November. These early gains disappeared later in the session, leaving the price 0.2 percent higher at $94.58 per barrel.
West Texas Intermediate, the US equivalent, also hit a 10-month high before swinging between gains and losses later in the day.
The recent price increases have been boosted by news earlier this month that two of the world’s largest producers, Saudi Arabia and Russia, will extend supply cuts until the end of the year.
Investors remain concerned that the rise in oil prices could hamper central banks’ efforts to curb inflation in the US and Europe, which could strengthen banks’ desire to keep interest rates high for longer, despite evidence suggesting that the global economic growth is slowing.
“The latest spike in oil prices is hugely unhelpful, especially as inflation was already above central banks’ targets of 2 percent,” said Dario Perkins, director of global macro at TS Lombard. “That said, it is important to keep these recent inflation developments in context. We are not yet in danger of reversing 12 months of solid disinflationary progress – not even close.”
Elsewhere, the region-wide Stoxx Europe 600 index closed less than 0.1 percent lower, with positive moves for real estate, financials and energy stocks offset by declines for healthcare groups and industrial sectors. London’s FTSE 100 rose 0.1 percent, as did France’s Cac 40.
China’s benchmark CSI 300 index fell 0.2 percent, while Japan’s Topix rose 0.1 percent as markets reopened after a holiday.