US stocks fall and dollar strengthens as rate rise concerns return

US stocks fell and the dollar strengthened against its peers on Monday as investors turned cautious over the pace of interest rate rises by the Federal Reserve following comments from senior central bank officials.

Wall Street’s benchmark S&P 500 fell 0.4 per cent in early New York trading and the tech-heavy Nasdaq Composite slipped 1 per cent, as investors took some profits following a rally late last week following better than forecast inflation data.

The S&P index added 6.4 per cent on Thursday and Friday and the Nasdaq Composite climbed 9.3 per cent, its biggest two-day gain since 2008.

The moves came after annual US consumer price growth slowed to 7.7 per cent in October, less than the 8 per cent expected by economists. The reading eases pressure on the Fed to increase its main policy rate by 0.75 percentage points when it next meets in December, having implemented four such rises in a row in an aggressive campaign to tame historically high rates of inflation.

Over the weekend Mary Daly, president of the San Francisco branch of the Fed, warned that the next phase of policymaking would be “difficult”.

“You have to be mindful of the cumulative tightening that’s already in the system. You have to be mindful of the lags in monetary policy,” Daly told the Financial Times. “You have to be mindful of the risks that are all throughout the global economy and the tremendous uncertainty that we have, even about what the evolution of inflation is going to be.”

Fed governor Chris Waller told a UBS conference in Australia on Monday morning that rates were going to “keep going up” and “stay high for a while until we see this inflation get down closer to our target”.

In government bond markets, the yield on two-year US Treasuries rose 0.09 percentage points to 4.42 per cent, while the yield on the benchmark 10-year Treasury note added 0.04 percentage points to 3.87 per cent. Yields rise when prices fall.

The dollar index, which tracks the currency against six others, added 0.7 per cent, recovering some of its losses last week.

In Europe, the regional Stoxx Europe 600 index added 0.4 per cent, consolidating a more than 3 per cent rise last week. London’s FTSE gained 1 per cent.

Shares in China-related real estate stocks soared after Beijing pivoted to support China’s indebted property sector and softened its longstanding zero-Covid policy.

The Hang Seng Mainland Properties index added as much as 13.7 per cent. Hong Kong-listed Country Garden, China’s biggest developer, shot up 45 per cent.

The broader Hang Seng index in Hong Kong closed up 1.7 per cent, trimming gains after rising as much as 3.9 per cent. China’s CSI 300 finished 0.2 per cent higher. Japan’s Topix lost 1 per cent and South Korea’s Kospi fell 0.3 per cent.