PARIS: Asian and European stock markets pushed higher on Thursday after Wall Street brushed off signs of rising US inflation.
Hong Kong stocks ended the Year of the Rooster leading a rally across Asian markets, and in midday trading London’s blue-chip FTSE 100 index pushed 0.5 percent higher.
In the eurozone, Frankfurt’s DAX 30 climbed 0.8 percent and in Paris the CAC 40 shot up by 1.3 percent.
Global markets went into a tailspin last week on the prospect the US Federal Reserve will hike interest rates at a sharper pace then expected a few months ago to prevent a spurt in inflation from a resurgent US economy and improving wages.
Investors had keenly awaited Wednesday’s US inflation data, which showed prices had shot up in January, to gauge what the Fed will do next.
While the news initially sent US equities tumbling, they quickly recovered and all three main indexes on Wall Street finished at least one percent higher as dealers were soothed by a surprisingly heavy drop in retail sales that eased fears inflation will be sustained and may tamper with growth.
“There is a sense now that higher consumer prices could kill off consumer spending and weigh on the US growth rebound,” said Jasper Lawler, head of research at London Capital Group.
“Slower growth would keep a lid on wage and overall price pressures,” he added, “so the Fed will probably will not deviate from the three hikes priced in by the market.”
Market analyst David Madden noted that the FTSE 100, DAX 30 and CAC 40 all hit one week highs in morning trading as investors are regaining confidence.
“Equities continue to be in recovery mode as traders are still cautiously optimistic,” he said in a note to clients.
“Investors are viewing the smaller swings on global stock markets as a sign that a lot of the fear dissipated, and are content to buy back into the market,” he added.
Meanwhile in Asia, Hong Kong ended two percent higher as traders headed into the Chinese New Year break. The index rose 5.6 percent over the past three days, helping it bite into last week’s drop of more than nine percent.
Tokyo ended 1.5 percent higher, despite a surge in the yen against the dollar, which tends to hurt exporters.
– Dollar takes a hit –
While equities ran higher, the dollar was in the dog house.
On currency markets the dollar took a hit across the board, with the yen at fresh 15-month highs, while the euro built on Wednesday’s gains that came after figures showed solid German economic growth.
Although higher inflation and bond yields would normally be positive for the dollar, the analysts said other options were more attractive.
“Global rate differentials explain a lot about why the dollar can’t find a bid, even when US inflation exceeds expectations,” said Lawler at London Capital Group.
“As the ECB, Bank of England (and Bank of Japan) move closer to tightening policy, bund, gilt and JGB yields will rise faster than (US) treasuries, making the euro, pound and yen more attractive than the dollar,” he said.
Bitcoin rose to $9,499.75 from 9,304.99 late on Wednesday.
Source: Brecorder.com
