Global Markets Soar on Lower than Expected Inflation Data
Global markets are experiencing a major rebound as a result of lower than expected inflation data from both the United States and the United Kingdom. The positive data has led investors to become more hopeful about the potential end to aggressive central bank interest rate hikes.
The Stoxx Europe 600 index was higher, led by gains in consumer products and mining stocks. Shares in French train maker Alstom fell 14% after the company announced plans to cut jobs and sell assets to improve its balance sheet. France’s CAC 40 index rose 0.5% to 7221.25 points, while Germany’s DAX rose 0.2% to 15,644.95 points, and Britain’s FTSE 100 surged 1.0% to 7,515.58 points.
In the United States, stock futures also point towards further gains, with the Dow futures up 0.2% and S&P 500 futures up 0.3%. The S&P 500 index closed on Tuesday with its biggest gain since April.
The Asia-Pacific index also saw significant gains, jumping more than 2% during the trading session.
The much-anticipated U.S. inflation report showed overall price growth slowing last month, raising the possibility that the Federal Reserve may avoid further interest rate hikes. This positive news has spurred stocks to rebound, with the S&P 500 up more than 7% in November and on track for its best monthly performance since October 2022.
In addition to the U.S. data, British inflation also slowed more than economists expected. The UK Consumer Price Index (CPI) was flat month-on-month in October, with an expected increase of 0.1%, and rose 4.6% year-on-year, with an expected increase of 4.8%.
This CPI report has had a significant impact on the expectations for the Federal Reserve, with Bank of America believing that the interest rate hike cycle has ended. The bank stated that the report was “the final straw in the interest rate hike cycle” and has changed its forecasts for the Fed accordingly.
The Fed swaps are now showing the likelihood of another rate hike dropping to almost zero, with markets pricing in a 50 basis point cut by July. The weak data further suggests that the global economy may slow down, prompting central banks to cut interest rates as early as 2024.
However, attention will now turn to Wednesday’s U.S. retail sales and producer price reports, as strong economic data may temper the enthusiasm for a rate cut by the Federal Reserve.
Overall, the market is seeing a significant rebound as a result of the lower than anticipated inflation data, leading to increased hopes for an end to global central bank interest rate hikes.