Monday, September 26, 2022

US stocks rise as investors weigh inflation outlook


US and European stocks rose on Friday as investors weighed early signs that inflation was steadying with concerns over the global economic outlook.

The blue-chip S&P 500 gained 0.3 per cent at the open in New York and the technology-heavy Nasdaq moved up 0.5 per cent, recouping some of the falls of the previous session.

In Europe, the regional Stoxx 600 also advanced 0.1 per cent, while Germany’s Dax rose 0.7 per cent. London’s FTSE 100 moved 0.2 per cent higher.

The rises put the S&P on track for a sixth consecutive week of gains, up 14.7 per cent from a low point of June 16. The Nasdaq Composite has gained 20 per cent over the same period.

Traders have become optimistic that the Federal Reserve will slow the rate of interest rate rises following the first economic data to suggest inflation in the world’s largest economy was easing.

US data this week showed that the US consumer price index rose 8.5 per cent year on year in July, below economists’ forecasts. The prices paid to US producers for goods and services also registered an unexpected fall last month because of lower petrol costs.

Consumer sentiment data released by the University of Michigan on Friday will provide further insight into how Americans feel about the state of the economy.

In debt markets, US government bonds made slight gains, with the yield on the benchmark 10-year Treasury note dropping 0.04 percentage points to trade at 2.8 per cent after climbing in the previous session. Yields move in the opposite direction of prices.

Trading volumes can be thinner during the summer, exacerbating asset price moves. “Maybe we shouldn’t read too much into summer illiquidity but the moves have been a bit all over the place of late,” wrote Jim Reid, a strategist at Deutsche Bank.

In UK debt markets, the 10-year gilt yield rose 0.04 percentage points to 2.1 per cent following the morning’s fresh gross domestic product data, while the pound slipped 0.7 per cent against the dollar to $1.21.

Those moves came as fresh data showed that the UK economy contracted in the second quarter of 2022 by 0.1 per cent after rising 0.7 per cent in the previous quarter, with overall figures close to those expected by economists and the Bank of England.

In Asia, Japanese stocks rallied as trading reopened following a holiday on Thursday after other equity markets were buoyed by US inflation data on Wednesday coming in lower than expected. Japan’s Topix added 2 per cent. Hong Kong’s Hang Seng rose 0.5 per cent.

International oil benchmark Brent crude fell 1.6 per cent to $98.02.

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