European Central Bank president Christine Lagarde has expressed scepticism that inflation has peaked
Stock markets fluctuated on Wednesday as eurozone inflation slowed for the first time in 17 months and investors awaited fresh signals about the US central bank’s interest rate plans.
Markets were also buoyed by hopes that China will further ease its strict Covid containment measures following widespread protests, though gains were tempered by leaders’ warnings of a crackdown on dissent.
Traders were awaiting a key speech by Federal Reserve chief Jerome Powell, with many expecting him to outline plans for future interest rate hikes to tackle high US consumer prices.
“Will he adopt a more hawkish-minded tone like he did after the last FOMC (Fed policy) meeting or will he have a less hawkish tone?” said Briefing.com analyst Patrick O’Hare.
“His tone is going to move the market’s thinking with respect to the path of monetary policy,” he said.
Powell was due to speak after government data on Wednesday showed that the US economy grew more than initially reported in the third quarter, reflecting upward revisions to retail spending and some forms of investment.
London, Paris and Frankfurt closed in the green, but the Down Jones lost around 0.4 percent.
Eurozone inflation eased to 10 percent in November, the first drop in 17 months, according to official data.
But this may not lead to an easing of European Central Bank policy as ECB president Christine Lagarde has expressed scepticism that inflation has peaked.
Inflation in the bloc had hit a record 10.6 percent in October, boosted also by soaring energy and food bills in the wake of Russia’s war in Ukraine.
“Euro area inflation figures surprised on the downside, providing an early indication that the record price pressures seen in recent months may have peaked,” said CEBR economist Karl Thompson.
However, he warned that “inflation is nonetheless likely to remain elevated throughout 2023” and forecast rising rates next month.
The inflation figure was still “extraordinarily high” but offered “hope that inflation may have peaked and the deceleration could be faster than anticipated”, said Craig Erlam, senior market analyst at OANDA.
Global central banks, including the Fed, have ramped up borrowing costs this year in a bid to dampen red-hot inflation that was fuelled also as economies reopened from the pandemic.
– ‘Intensifying headwinds’ –
In Asia, stocks mostly rebounded as investors looked past weekend demonstrations in China after officials announced moves aimed at softening the zero-Covid strategy.
But in a sign that the leadership was determined to maintain its authority, the country’s top security body called for a “crackdown” against “hostile forces”.
New clashes broke out in China’s southern city of Guangzhou on Tuesday night and into Wednesday, according to witnesses and social media footage verified by AFP.
Data showing China’s factory activity shrank further in November underscored the impact the zero-Covid approach has had on the world’s second-biggest economy.
“The headwinds facing China are intensifying and the protests of recent days could make it even more challenging to navigate… Even the best-case scenario is one of significant turbulence,” added Erlam.
Elsewhere, oil prices jumped by around three percent, with the international benchmark, Brent, reaching almost $87 per barrel.
– Key figures around 1630 GMT –
New York – Dow: DOWN 0.4 percent at 33,717.64 points
London – FTSE 100: UP 1.0 percent at 7,587.51 (close)
Frankfurt – DAX: UP 0.3 percent at 14,397.04 (close)
Paris – CAC 40: UP 1.0 percent at 6,738.55 (close)
EURO STOXX 50: UP 0.8 percent at 3,964.72
Tokyo – Nikkei 225: DOWN 0.2 percent at 27,968.99 (close)
Hong Kong – Hang Seng Index: UP 2.2 percent at 18,597.23 (close)
Shanghai – Composite: UP 0.1 percent at 3,151.34 (close)
Euro/dollar: DOWN at $1.0318 from $1.0330 on Tuesday
Dollar/yen: UP at 139.36 yen from 138.63 yen
Pound/dollar: DOWN at $1.1937 from $1.1952
Euro/pound: UP at 86.43 pence from 86.42 pence
Brent North Sea crude: UP 3.1 percent at $86.82 per barrel
West Texas Intermediate: UP 3.0 percent at $80.51 per barrel
