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European stocks rose on Thursday after gains in Asian markets, after a sharper-than-expected drop in US inflation triggered a selloff in dollars and pushed Wall Street stocks to their highest level in more ‘a year.
The regional Stoxx 600 in Europe added 0.7%, consolidating a 1.5% rise – the highest since early June – in the previous session. The French Cac 40 gained 0.7%, while the German Dax rose 0.6%.
London’s FTSE 100 gained 0.4%, led by basic materials and healthcare stocks. Data showing a 0.1% contraction in UK economic growth in May left the pound up 0.6% against the dollar at $1.307, its highest level since April 2022.
The moves in stocks came after the annual increase in the consumer price index in the United States fell from 4% in May to 3% in June, the slowest rate of inflation since March 2021.
Core inflation also fell more than expected, and the figures should ease pressure on the Federal Reserve to continue raising interest rates at its next meeting later this month, as analysts s are still expecting a quarter percentage point increase from the central bank. reference rate.
However, the market’s implied probability of a further rate hike in the fall has fallen to around one in three from one in two before the CPI was released.
“We, and increasingly the market, are skeptical that the Fed will hike again after the July 26 meeting,” said Steve Englander, head of G10 FX research at Standard Chartered, adding that the latest inflation numbers could turn out to be a “game changer”. for the dollar. On Wednesday, the U.S. dollar index, which measures the currency against a basket of six others, hit its lowest level in 15 months.
Preston Caldwell, chief US economist at Morningstar, said inflation now showed “widespread signs of decelerating”, supporting his view that the Fed would begin an “aggressive” rate cut next year.
Wall Street’s benchmark S&P 500 hit a 15-month high after June consumer price figures, with big tech companies leading the charge.
Index trailing contracts rose 0.3% on Thursday ahead of the New York open, while trailing contracts for the tech-heavy Nasdaq 100 rose 0.6%. Producer price data and employment figures are due out later Thursday.
Asian markets rose even as China’s exports and imports fell faster than expected in June. The Chinese CSI 300 gained 1.4%, the South Korean Kospi gained 0.5%, while the Japanese Topix rose 1%.
Hong Kong’s Hang Seng Index rose 2.6% while the Hang Seng Tech Index rose 3.6% after government officials signaled support for the tech sector.
