US stocks continued to rise on Friday, while the dollar weakened, after lower-than-expected inflation data for the world’s largest economy fueled speculation that the Federal Reserve will rate tightening by the end of the year.
Wall Street’s benchmark S&P 500 was up 0.6% in early New York trading after its best day for two and a half years on Thursday, when it rose 5.5%. The tech-heavy Nasdaq Composite rose 1.3%, consolidating its 7.4% gain in the previous session.
The dollar index is up 11.3% this year but slipped on Friday as investors eased expectations of even stronger interest rate hikes in the US. The coin is down 1% on the day against a basket of six equivalents, extending its decline since its peak in late September.
“The dollar peak may be over, but the dollar downtrend may not be in yet,” said Francesco Pesole, FX strategist at ING. Fears of a global recession next year could prompt investors to return to what many see as a safe-haven asset in times of economic uncertainty, Pesole added.
The moves come after the US annual CPI increase reached 7.7% in October, the smallest increase in 12 months since January and a sharp drop from the annual rate of 8.2%. in September.
Markets are now betting that there is about a 70 percent chance the Fed will raise interest rates by 0.5 percentage points when they meet in December, breaking a streak of four consecutive 0.75 percentage points increases.
But analysts warn that some investors may be getting ahead of themselves.
“It’s still too early to say the inflation threat is over,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. pause the “interest rate hike cycle”. “.
Emmanuel Cau, head of European equity strategy at Barclays, warned that core CPI numbers remained “too high” for central banks to consider easing financial conditions. “Lower inflation is a step in the right direction but the pace of inflation reduction is yet to be seen,” Cau said.
The US government bond market, closed on Friday for Veterans Day, rallied shortly after the release of the consumer price index. Yields on two-year US Treasuries fell 0.29 percentage points to 4.33%, their biggest daily decline in more than a decade. The yield on the benchmark 10-year Treasury note fell 0.33 percentage points to 3.81%, down from a peak of 4.25% in October. Yields fell as prices rose.
In Europe, the Stoxx 600 region gained 0.2%, even as the European Commission predicts a sharp drop in German output in the coming months. London’s FTSE 100 fell 0.5%, wiping out previous gains, after Britain’s GDP fell 0.6% between August and September – a larger drop than the 0.4% seen by economists. economic forecast.
Meanwhile, Asian stocks edged higher, trailing indexes in the US. Hong Kong’s Hang Seng Index rose 7.7%, South Korea’s Kospi gained 3.4% and China’s CSI 300 gained 2.8%.
Commodities strengthened on Friday after China shortened Covid-19 quarantine requirements for close contacts and international travelers, while the dollar weakened.
Brent crude, the international oil benchmark, rose 3% to trade at $96.45 a barrel. Three-month benchmark contracts for the steelmaking raw materials zinc and aluminum led the gains among industrial metals, up 3.7% to under $3,000 a tonne and $2,433 a ton, respectively. Tin rose 5.1% to $21,140 a tonne.
Additional reporting by Harry Dempsey in London