NEW YORK, Dec 20 (Reuters) - MSCI's global equities index edged lower in afternoon trading on Wednesday while Treasury yields fell as U.S. economic data released earlier in the day beat expectations and UK inflation slowed at a rate that took markets by surprise.
Oil prices advanced slightly after earlier hitting their highest level in nearly three weeks, as traders dealt with worries about disruptions in the Red Sea after Yemen's Iran-aligned Houthi militants stepped up attacks on commercial ships.
The dollar rose against other major currencies, while sterling fell sharply after UK inflation plunged in November to its lowest rate in more than two years at 3.9%. That was far lower than the 4.4% economists polled by Reuters had expected, making it less of an outlier globally.
In U.S. economic data, existing home sales rose unexpectedly in November, but further gains may be limited by a housing shortage while mortgage rates retreat from 23-year highs.
Also, amid optimism about the labor market, the Conference Board said its consumer confidence index increased to 110.7 this month from November's downwardly revised 101.0. Economists had expected an increase to 104.0 from 102.0 as previously reported.
"We got a series of beats on the economic data this morning. Existing home sales and consumer confidence both beat expectations and that seems to be putting a little bit of a damper on bond yields," said Sameer Samana, Senior Global Market Strategist at Wells Fargo Investment Institute in Charlotte.
And with data suggesting that the economy is "headed toward a softish landing," this leads investors to favor more economically sensitive sectors such as energy and consumer discretionary over defensive sectors such as consumer staples, according to Samana.
On Wall Street, the Dow Jones Industrial Average fell 216.99 points, or 0.58%, to 37,340.93, the S&P 500 lost 41.44 points, or 0.87%, to 4,726.93 and the Nasdaq Composite dropped 132.85 points, or 0.89%, to 14,870.37.
The pan-European STOXX 600 index earlier closed up 0.19% and MSCI's gauge of stocks across the globe shed 0.56%.
Benchmark U.S. 10-year Treasury yields fell to an almost five-month month low as government bond yields fell globally after the British inflation data.
Benchmark 10-year notes were down 4.1 basis points to 3.881%, from 3.922% late on Tuesday. The 30-year bond was last down 3 basis points to yield 4.0063%. The 2-year note was last was down 6.1 basis points to yield 4.3755%.
“The UK inflation data is the trigger to this morning’s rally,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.
In currencies, the dollar strengthened against sterling after the UK inflation data fueled speculation of interest rate cuts by the Bank of England. Sterling was last trading at $1.264, down 0.71% on the day.
The dollar index, which measures the greenback against a basket of major currencies, rose 0.294%, with the euro down 0.35% to $1.0942. Meanwhile, the Japanese yen weakened 0.03% versus the greenback at 143.87 per dollar.
In commodities, global oil benchmark Brent hovered above $80 a barrel amid jitters over global trade disruption and geopolitical tensions in the Middle East following attacks on ships in the Red Sea by Yemen's Iran-aligned Houthi forces.
U.S. crude settled up 0.38% at $74.22 per barrel and Brent settled at $79.70, up 0.59% on the day.
In precious metals, spot gold dropped 0.4% to $2,031.61 an ounce. U.S. gold futures fell 0.27% to $2,034.50 an ounce.
(Additional reporting by Karen Brettell in New York, Yoruk Bahceli in Amsterdam, Stella Qui in Sydney; Editing by Alexander Smith, Kirsten Donovan and Nick Zieminski)
