By Sinead Carew
NEW YORK (Reuters) – Global equities dipped on Thursday as investor enthusiasm was dampened by a pullback in oil prices related to rising inventories, while the dollar rose as economic data drove expectations that the Federal Reserve will raise interest rates.
The U.S. S&P 500 <.SPX> ended down, led by an 1.8 percent drop in energy shares <.SPNY>. Brent crude <.LCOc1> settled down 2.6 percent and U.S. crude fell 5.5 percent.
The Nasdaq <.IXIC> was a bright spot in U.S. equities, rising on news of a technology deal as it drew closer to its lifetime peak, hit in 2000.
U.S. consumer prices fell in the 12 months through January, the first such decline since 2009 as gasoline prices continued to tumble, but core prices, which exclude volatile items such as food and gasoline, rose more than expected.
The MSCI All-Country World equity index <.MIWD00000PUS> was down 0.2 percent after having hit a record high of 434.40 points earlier in the trading day.
The dollar rose to a one-month high against a basket of currencies, as the data on core inflation and data showing a rise in U.S. durable goods orders supported bets that the Federal Reserve will raise interests rates.
The president of the San Francisco Fed, John Williams, in an interview on Fox Business Network on Thursday, said that the Fed will probably start raising interest rates “sometime this summer, or this fall” as inflation bottoms out and begins to recover.
The comments followed congressional testimony by Fed Chair Janet Yellen, this week, that the U.S. central bank would consider rate hikes on a “meeting-by-meeting” basis.
After those comments, Thursday’s data was a key driver in currency and bond markets.
“It undermined the view that there’s domestic disinflation. It’s more an international story about falling prices in goods and commodities,” said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York.
U.S. Treasuries prices fell after the consumer price data pointed to marginally less dovish Fed policy and an auction of seven-year notes saw soft demand.
The Dow Jones industrial average <.DJI> fell 10.15 points, or 0.06 percent, to 18,214.42, the S&P 500 <.SPX> lost 3.12 points, or 0.15 percent, to 2,110.74, and the Nasdaq Composite <.IXIC> added 20.75 points, or 0.42 percent, to 4,987.89.
News that Avago Technologies reached a deal to acquire Emulex helped boost the Nasdaq. Avago jumped 14.7 percent to $ 129.47. Emulex shares surged 24.6 percent to $ 7.93.
Earlier in the day European bond yields sank to fresh lows as investors positioned for an extended era of cheap money ahead of the European Central Bank’s bond-buying scheme.
The pan-European FTSEurofirst 300 <.FTEU3> closed up 1 percent. Greek equities <.ATG> fell 2 percent, after Greece said on Wednesday that it would struggle to make debt repayments to the International Monetary Fund and the European Central Bank this year.
The Russian rouble strengthened against the dollar for a third straight day but sharply pared gains as oil prices fell. The euro fell 1.5 pct against the dollar.
Gold prices rose 0.35 percent, rallying for a second day on expectations of a Fed interest rate hike.
(Reporting by Sinead Carew; Additional reporting by Richard Leong; Editing by Leslie Adler)