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US stocks rose on Thursday after closely watched US inflation data came in below expectations, bolstering investors’ view that the Federal Reserve has probably finished raising interest rates.
Wall Street’s benchmark S&P 500 added 0.7 per cent, while the tech-focused Nasdaq Composite gained 0.8 per cent at the New York opening bell.
The dollar, which weakens when investors expect lower interest rates, fell 0.4 per cent against a basket of six peer currencies.
The moves came after the latest US inflation reading showed prices rose at an annual rate of 3.2 per cent in July, marginally below the 3.3 per cent consensus forecast. The reading was higher than 3 per cent in the previous month.
Core inflation, which strips out volatile food and energy prices, came in at 4.7 per cent, also slightly below the 4.8 per cent forecast of economists polled by Reuters.
The data is likely to cement investors’ belief that the central bank will keep rates steady at the next meeting of the Federal Open Market Committee in September, having taken them to a 22-year high since last summer in efforts to bring down raging inflation.
“The market is already making its feelings known with the expectations that this data may tip the Fed towards being dovish”, said Richard Flax, chief investment officer at Moneyfarm.
In US government bond markets, yields on the policy-sensitive two-year Treasury fell 0.03 percentage points to 4.77 per cent. Yields on the benchmark 10-year note lost 0.02 percentage points to 3.99 per cent. Bond yields rise as prices fall.
“There is still one more inflation and job report to come before the next FOMC meeting,” said Nathaniel Casey, investment strategist at Evelyn Partners. “So while committee members are unlikely to make their next decision from this CPI print alone, it is yet another step in the right direction”.
Meanwhile, European and Asian equities climbed after China said it would end a ban on tour groups travelling to dozens of countries, boosting the shares of luxury goods, travel and leisure companies.
Europe’s region-wide Stoxx Europe 600 index added 0.6 per cent, extending gains from the previous session, while France’s Cac 40 rose 1.2 per cent and Germany’s Dax advanced 0.7 per cent.
Japan’s Topix rose 0.9 per cent. South Korea’s Kospi fell 0.1 per cent but the declines were offset by gains for travel and leisure companies.
Stocks sensitive to consumer spending rose in Europe and Asia after China announced it would resume outbound group travel to a list of 78 countries, after having closed its borders for almost three years during the coronavirus pandemic.
The Stoxx Europe Luxury 10 index gained 2.2 per cent as investors expected demand for goods to rise once consumers in the world’s second-largest economy start to travel.
European natural gas prices dropped 6 per cent after two Australian producers of liquefied natural gas held talks with unions on Thursday to try to stave off a strike that could disrupt global supplies.
The futures price on the Title Transfer Facility, the European benchmark, had risen 40 per cent on Wednesday to its highest point since mid-June over fears that the strike would raise prices for buyers in Europe.
Chinese equities showed little reaction to a US executive order restricting investment in the country’s quantum computing, advanced chip and artificial intelligence industries.
US president Joe Biden on Wednesday announced an order that will block some types of investment in the three Chinese sectors and require companies to declare others. China’s CSI 300 gained 0.2 per cent while Hong Kong’s Hang Seng was flat.