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Global stocks rallied on Wednesday, as investors waited for megacap tech companies to report earnings, offering an insight into the sector that fuelled much of Wall Street’s rally in the first half of the year.
The tech-focused Nasdaq Composite and the benchmark S&P 500 both rose 0.2 in morning trading, as traders prepared for Tesla and Netflix to post the first tech-sector results of this earnings season.
Both companies are among the heavyweights that have lifted the S&P 19 per cent since the start of the year, as hype about artificial intelligence and expectations of peaking rates boosted technology sector valuations.
Meanwhile, Goldman Sachs shares fell 0.3 per cent after the bank reported its lowest quarterly profit in almost six years, citing a slowdown in its investment banking and trading business.
The KBW index of bank stocks nevertheless added 0.4 per cent on Wednesday and extended its gains from the previous session, when better news from Morgan Stanley and Bank of America lifted investor sentiment.
The results came at a time of heightened scrutiny of US lenders’ balance sheets, after the collapse of several regional banks in the spring sent shockwaves through the financials sector.
In Europe, the region-wide Stoxx 600 added 0.4 per cent, extending gains from the previous session, while France’s Cac 40 edged up 0.3 per cent.
London’s FTSE 100 climbed 1.7 per cent and inched towards its highest level in a month, as shares of UK property companies surged following signs that inflation was slowing and interest rates could peak lower.
The moves came after the Office for National Statistics said the UK’s annual consumer price inflation eased to 7.9 per cent in June, from 8.7 per cent in the previous month, landing below analysts’ forecasts.
The reading ended a four-month streak of UK price growth readings that exceeded expectations, easing the pressure on the Bank of England policymakers who have already lifted interest rates to 5 per cent, their highest level since 2008.
“We finally got a much-needed and long-awaited cooling in UK inflation, which will come as a huge relief to both policymakers and the government,” said Jamie Dutta, market analyst at Vantage.
The figures come a week after slower than expected US inflation boosted global markets.
The FTSE 100 index of the largest London-listed companies has trailed far behind its peers in the region since the start of the year, as investors worried that sticky price pressures in the UK would force the central bank to keep interest rates higher for longer.
But the inflation reading on Wednesday made it more likely that the BoE’s Monetary Policy Committee will lift rates by 0.25 percentage points at its next meeting in August, instead of another 0.5 percentage point increase.
“One slower CPI print is not enough to cause a change in policy. But [BoE governor] Andrew Bailey and his team will hope that it is the start of a trend,” said Chris Beauchamp, chief market analyst at IG Group.
The rally in European equities was also helped by comments from European Central Bank governing council member Klaas Knot, who on Tuesday said it was not certain whether the ECB would continue to lift interest rates beyond its policy meeting next week.
The yield on the policy-sensitive two-year German government bond slipped 0.03 percentage points to 3.15 per cent on Wednesday. Bond yields fall as prices rise.
Earlier, Asian equities had slipped, as China’s stalled economic recovery and the government’s slow rollout of stimulus measures weighed on market sentiment. The Hang Seng index dropped 0.3 per cent, while China’s blue-chip CSI 300 index slipped 0.1 per cent.
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