US open: Sombre opening on the Street as geopolitical tensions weigh on investors
Wall Street trading kicked off on a sombre note on Wednesday amid caution ahead of the release of the latest Federal Reserve minutes and after a slightly worse-than-expected print on US inflation data for March, as geopolitical tensions weighed on sentiment.
At 1530 BST, the Dow Jones Industrial Average and S&P 500 were down by 0.36% and 0.16%, respectively, while the Nasdaq had managed to scrape ahead 0.09%.
The mood was dominated by concerns about a possible US military strike in Syria, for which Trump and his administration were working hard to gain international support.
London Capital Group analyst Jasper Lawler said: "Syria has distinct risks. Military intervention in Syria that puts the US in direct confrontation with Russia can only be a bad thing for market sentiment."
Meanwhile, Rabobank strategist Jane Foley commented: "If a paring back of the risk of trade wars is good news for market sentiment, this week's warnings by Russia to the US of grave repercussions are the opposite."
This came as President Trump weighed in with one of his characteristically subtle tweets: "Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and 'smart!' You shouldn't be partners with a Gas Killing Animal who kills his people and enjoys it!"
In terms of data, US CPI fell 0.1 %, below the consensus forecast of 0%, while the core CPI rose 0.2%, as expected.
Core US CPI was boosted by mean-reversion in rents and a rebound in medical care, note economists at Pantheon Macroeconomics, partly offset by a "surprising" dip 0.6% dip in apparel prices and an "unsurprising" 0.3% decline in used car prices.
"Fed officials know that unfavourable base effects will lift core inflation further over the next four months, to about 2.5% by July," Pantheon says.
"What matters, then, is whether this increase comes as a surprise to the public and materially raises peoples' inflation expectations. If that happens, policymakers will fear an adverse feedback loop into wage negotiations, just as unemployment approaches a 50-year low.
"It will take time for any shift in inflation expectations to become clear, but in the meantime, we'd expect Fed hawks to point out to their colleagues that the core CPI rose at a 3.0% annualised rate in the first quarter, the fastest increase in 12 years. We expect the Fed to hike again in June, and in Sep and Dec too."
Fed minutes of the 20-21 March meeting are out at 1900 BST, of which IG analyst Joshua Mahony said: "This evening see the FOMC release their latest minutes, with markets attempting to better ascertain exactly how many rate rises we will see under Powell in 2018. With Janet Yellen speculating that we will likely see 3-4 2018 rate rises, markets will be watching keenly to see if the improved fiscal outlook will indeed push the Fed into tightening policy at such a pace."
On the corporate front, shares of Facebook were down 0.29% as chief executive Mark Zuckerberg prepared for a second day of testimony before US lawmakers and 21st Century Fox lost 0.06% after its UK offices were raided by officials from the European Commission investigating a potential abuse of its position in the broadcasting of major sports events.