NEW YORK, United States (AFP) — Stock markets wavered on Wednesday on surprisingly strong American inflation data, but rallied to finish higher in both Europe and the US.
European equity markets briefly tumbled into the red, as the US pricing data fueled expectations that borrowing costs might be ramped up more aggressively than previously thought.
US stocks also sold off, opening lower, but soon moving into positive territory and finishing solidly higher. The S&P 500 gained 1.3 percent for its fourth straight positive close.
Sam Stovall, chief investment strategist at CFRA Research said the market remained brittle after the swings of the last 10 days, but noted that the economic outlook remains broadly upbeat and not prone to a recession anytime soon.
US consumer price inflation jumped to 0.5 percent in January and the core consumer price index, which excludes volatile food and fuel categories, rose 0.3 percent, the largest increase since January 2017.
While Treasury bond yields rose after the pricing data, the bounce in equities suggested “stocks are comfortable with the idea that a little bit of inflation is a good thing,” said Briefing.com.
“Rising inflation goes hand-in-hand with a growing economy (or that is at least the textbook view) and a growing economy should translate into good earnings growth.”
Analysts said worries about the inflation also were countered by disappointing retail sales data, showing an unexpected 0.3 percent drop last month, that could weaken the case for more aggressive Fed tightening. The US central bank is expected to hike rates three times this year.
“This is not a game-changer,” Viraj Patel, strategist at ING, said of the data.
A Fed rate hike is widely expected for next month, Patel said, but the market was not convinced of the central bank’s “ability to deliver more than three hikes this year.”
Oliver Jones at Capital Economics, meanwhile, warned that the respite for the US stock market was probably going to be short-lived.
“Given how markets have reacted to recent data, it certainly seems likely that the stock market would remain under fire,” he said.
In Europe, the continent’s biggest economy, Germany, expanded by 0.6 percent in the final quarter of last year, official data showed.
Bourses in Frankfurt and Paris climbed more than one percent, while London advanced 0.6 percent.
In Asia, Hong Kong’s main stocks index closed up more than two percent, extending a rebound from the sell-off last week.
Tokyo, however, fell to another four-month low as the yen strengthened against the dollar, at one point hitting a 15-month high.
Oil prices shot higher after US oil inventories rose less than expected.
Key figures around 2140 GMT
New York – DOW: UP 1.0 percent at 24,893.49 (close)
New York – S&P 500: UP 1.3 percent at 2,698.63 (close)
New York – Nasdaq: UP 1.9 percent at 7,143.62 (close)
London – FTSE 100: UP 0.6 percent at 7,213.97 (close)
Frankfurt – DAX 30: UP 1.2 percent at 12,339.16 (close)
Paris – CAC 40: UP 1.0 percent at 5,165.26 (close)
EURO STOXX 50: UP 0.9 percent at 3,369.80
Tokyo – Nikkei 225: DOWN 0.4 percent at 21,154.17 (close)
Hong Kong – Hang Seng: UP 2.3 percent at 30,515.60 (close)
Shanghai – Composite: UP 0.5 percent at 3,199.16 (close)
Euro/dollar: UP at $1.2457 from $1.2350
Pound/dollar: UP at $1.4006 from $1.3890
Dollar/yen: DOWN at 106.98 yen from 107.83 yen
Oil – Brent North Sea: UP $1.64 at $64.36 per barrel
Oil – West Texas Intermediate: UP $1.41 at $60.60 per barrel
© Agence France-Presse
