The US Federal Reserve has said its decision on the timing and magnitude of rate hikes will depend on data
Stock markets bounced on Wednesday as better-than-expected US inflation data raised hopes that the US Federal Reserve will tone down its aggressive interest-rate policy.
With energy costs dropping in recent weeks, the US consumer price index eased to an annual rate of 8.5 percent in July from a 40-year high of 9.1 percent the previous month, the Labor Department reported.
Signs that inflation could be coming off the boil in the world’s biggest economy could persuade the US Fed to tighten monetary conditions much more gradually than first anticipated.
Investors had been worried that too steep an increase in borrowing costs could choke off economic recovery.
Wall Street soared on the news, while the dollar took a tumble.
European stock markets closed firmly in the black after falling earlier in the day.
“The slowdown in US inflation was anticipated, but was sharper than economists had expected,” said Asteres analyst Sylvain Bersinger.
“Softer US inflation will brake the interest rate hikes.”
Briefing.com analyst Patrick O’Hare agreed.
“The key takeaway from the report is that it supports the peak inflation view, which in turn supports the market’s hope that the Fed will temper its aggressive rate-hike approach in coming months,” he wrote.
The data on Wednesday come at a sensitive time for world markets, which have been buffeted by the war in Ukraine, supply chain snarls and rising China-US tensions over Taiwan.
– Oil down –
While the latest earnings season has been less painful than feared, there are increasing signs that the economic slowdown is beginning to impact companies, with some major firms — including Apple and Amazon — providing downbeat outlooks.
Chip-maker Micron became the latest, saying revenue would likely come in at the low end of its forecasts in the fourth quarter owing to weak demand.
A day before, rival Nvidia unveiled disappointing results.
On the oil markets, crude prices remain stuck around six-month lows, as the prospect of lower demand caused by a possible recession has essentially wiped out all of the gains seen since Russia’s invasion of its neighbour in February.
But Edward Moya, analyst at OANDA trading group, said the market was unlikely to fall much further.
“Whatever crude demand destruction that occurs from a weakening global economy won’t be able to drag down oil prices much lower given how low the supply outlook remains,” he said.
– Key figures at around 1545 GMT –
New York – Dow: UP 1.6 percent at 33,287.33 points
London – FTSE 100: UP 0.3 percent at 7,507.11 (close)
Frankfurt – DAX: UP 1.2 percent at 13,700.93 (close)
Paris – CAC 40: UP 0.5 percent at 6,523.44 (close)
EURO STOXX 50: UP 0.2 percent at 3,657.09
Tokyo – Nikkei 225: DOWN 0.7 percent at 27,819.33 (close)
Hong Kong – Hang Seng Index: DOWN 2.0 percent at 19,610.84 (close)
Shanghai – Composite: DOWN 0.5 percent at 3,230.02 (close)
Euro/dollar: UP at $1.0340 from $1.0213 Tuesday
Pound/dollar: UP at $1.2244 from $1.2071
Euro/pound: DOWN at 84.43 pence from 84.57 pence
Dollar/yen: DOWN at 132.58 yen from 135.12 yen
West Texas Intermediate: DOWN 0.5 percent at $89.98 per barrel
Brent North Sea crude: DOWN 0.6 percent at $95.72 per barrel
burs-spm/kjm
