ALBAWABA – Data showing United States (US) inflation easing drove US stocks over the weekend, fuelled by hopes that central banks will hold on further interest rate hikes in coming months, news agencies reported Monday.
News on the personal consumption expenditures (PCE) index dropping sharply bolstered investment, noting that the PCE is the US Federal Reserve’s preferred inflation gauge.
All three main indexes on Wall Street rallied Friday, according to Agence France-Presse (AFP), with Apple closing above the $3 trillion capitalisation mark for the first time.
US stocks kicked off the new quarter on a bullish note, with Tesla Inc. and BYD Co. climbing on record quarterly sales.
Tesla gained 6.3 percent in premarket trading, while BYD climbed in Hong Kong trading, leading shares of battery suppliers also higher, as per Bloomberg.
Forecasts on economic growth, coupled with a fall in jobless claims, fuelled expectations that the Fed will have to hike interest rates again in July or August.
The new PCE figure came out along with news of Eurozone inflation also easing, thanks to a decline in energy costs, AFP reported.
S&P 500 and Nasdaq indexes gained big after having rallied a strong first half of the year, despite the consecutive rate hikes and the regional banking crisis.
"Markets are already pricing in further rate hikes this month from the Federal Reserve, as well as the ECB, followed by the Bank of England in August," CMC Markets analyst Michael Hewson told AFP.
"The bigger question is what comes after,” he said, warning that there “may not see many more after these hikes."
The Wall Street rally rippled through the world to Asia and Europe, Bloomberg reported.
Hong Kong jumped more than two percent while Tokyo, Shanghai, Seoul and Taipei were each up at least one percent, as reported by AFP.
There were also healthy advances in Sydney, Singapore, Mumbai, Jakarta, Bangkok and Manila.
Meanwhile, Tokyo was also boosted after news that the Bank of Japan's Tankan survey index rose for the first time in seven quarters. The Tankan survey measures confidence among the country's largest manufacturers in government policy.
London, Paris and Frankfurt were also well in the green.
End of the rate hike cycles?
AFP’s analysts have warned that the PCE figure – although welcomed on trading floors – may not be convincing enough for Fed officials after one reading.
In fact, they anticipate that the bank is tipped to resume hiking this month after pausing in June.
"Whilst the data is seemingly travelling in the right direction (lower inflation), it is too soon for the Fed to ring the bell and claim a job well done," said National Australia Bank's Rodrigo Catril.
Key figures by AFP - 0810 GMT
Tokyo - Nikkei 225: UP 1.7 percent at 33,753.33 (close)
Hong Kong - Hang Seng Index: UP 2.1 percent at 19,306.59 (close)
Shanghai - Composite: UP 1.3 percent at 3,243.97 (close)
London - FTSE 100: UP 0.2 percent at 7,547.71
Euro/dollar: DOWN at $1.0879 from $1.0912 on Friday
Pound/dollar: DOWN at $1.2671 from $1.2696
Euro/pound: DOWN at 85.87 pence from 85.92 pence
Dollar/yen: UP at 144.75 yen from 144.33 yen
West Texas Intermediate: DOWN 0.1 percent at $70.59 per barrel
Brent North Sea crude: FLAT at $75.41 per barrel
New York - Dow: UP 0.8 percent at 34,407.60 (close)
