Receive free Markets updates
We’ll send you a myFT Daily Digest email rounding up the latest Markets news every morning.
European stocks and Wall Street futures rallied on Friday, after lower than expected inflation data pointed to the success of global interest rates going higher, giving investors hope that they would soon peak.
US futures registered gains after the US core personal consumption expenditure price index slipped to 4.6 per cent in May, below the no-change 4.7 per cent forecast of economist polled by Reuters.
Contracts tracking Wall Street’s benchmark S&P 500 added 0.6 per cent and those tracking the tech-focused Nasdaq 100 gained 0.8 per cent ahead of the New York open.
As the end of the first half of the year approached, the Nasdaq was on course to record its third-best first half in its history, according to data from Bespoke Investment Group, as investors loaded up on artificial intelligence-related stocks. Apple, the technology maker, was up 1.2 per cent in pre-market trading, putting it on track to break a $3tn valuation.
The yields on the policy-sensitive two-year Treasuries slipped 0.02 percentage points to 4.85 per cent, while those on the benchmark 10-year notes edged down 0.02 percentage points to 3.83 per cent. Bond yields rise as prices fall.
Yields on US government debt hit their highest level since early March in the previous session, after surprisingly strong data boosted expectations that the Federal Reserve would need to raise interest rates further to tame inflation.
Meanwhile, the pan-European Stoxx 600 added 1.1 per cent, extending early-morning gains, while France’s Cac 40 and Germany’s Dax both added 1.2 per cent.
The gains in Europe were fuelled by the latest report on eurozone inflation, which eased more than economists had expected. The annual rate of price growth slowed to 5.5 per cent in June, from 6.1 per cent in the previous month, landing 0.1 percentage points below analyst expectations.
The closely watched measure of core inflation, which strips out volatile food and energy prices, was also 0.1 percentage points less than forecast, at 5.4 per cent. Together the moves raised hopes that the European Central Bank could halt its policy of raising rates aggressively to damp inflation sooner than expected.
Derivatives markets adjusted their ECB policy predictions, overwhelmingly betting on a quarter-point rate increase in July, and lowering the likelihood of a larger half-point rise. The central bank had last raised its benchmark deposit rate to 3.5 per cent in June.
European blue-chip indices have made gains in the first half of the year, as investors expected that inflation would slow and the ECB’s historic tightening campaign would peak.
London’s FTSE 100, which has trailed other benchmarks in Europe this year, rose 0.8 per cent.
China-related equities made moderate gains, with the CSI 300 index gaining 0.5 per cent and Hong Kong’s Hang Seng up 0.1 per cent.
Earlier in the day, China released official purchasing managers’ indices for June showing a contraction in factory activity and weaker than expected growth in services, bolstering calls for Beijing to enact further stimulus measures.
The renminbi added 0.1 per cent against the dollar, after briefly slipping to its weakest point since November.
“The softer momentum means more policy support is needed to reinvigorate the economy,” analysts at HSBC said.
Read the full article here
