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Stocks advance as inflation slows

LONDON: Stocks advanced Friday (31st of March, 2023) data showed inflation slowing in the eurozone and the United States, and a UK economy performing slightly better than thought.

With the US Federal Reserve and European Central Bank raising interest rates to tame inflation, markets were eagerly waiting for the latest inflation data to see if monetary policymakers have room to pause hikes given recent turmoil in the banking sector.
The eurozone’s annual inflation rate slowed sharply to 6.9 percent in March from 8.5 percent in February, beating expectations as energy prices eased, the EU’s statistics agency said.
In the United States, the PCE Price Index, the Federal Reserve’s preferred measure of inflation, showed inflation slowed to an annual rate of 5.0 percent in February from 5.3 percent.
Wall Street was solidly in the green in late morning trading, while Europe’s main equity indices closed the day higher.
The dollar held onto gains made ahead of the release of the data.
The core PCE Price Index that excludes volatile energy and food prices showed a smaller annual decline to 4.6 percent from 4.7 percent in January, and month-on-month increased by 0.3 percent.
Personal spending also rose by 0.2 percent month-on-month in February, down from a 2.0 percent rise in January.
“This weaker-than-expected number appears to be tempering market expectations that the Fed will be forced to raise rates much more than their current levels,” said market analyst Michael Hewson at CMC Markets.
The eurozone data also showed eurozone core inflation edged up to 5.7 percent on an annual measure.
“Headline inflation is coming down sharpish due to energy base effects — but core is rising and showing an extremely sticky tendency which is the real worry,” noted Finalto analyst Neil Wilson.
Inflation still remains well above the two-percent level targeted by the European Central Bank (ECB), despite falling from a peak of 10.6 percent in October.
Turmoil in the US and European banking sectors this month — which saw the collapse of three US banks and the forced takeover of Credit Suisse by UBS — was triggered in part by rising interest rates.
Danni Hewson, head of financial analysis at AJ Bell, said inflation remains a long way away from the two percent target set by policymakers but the considerable drop in recent months drop “might buy them a bit of thinking time and chance to gauge whether there are any more cracks waiting to appear in the banking sector.”
Expectations for how high borrowing costs will go have come down as banks are seen as likely to cut back on lending, which would mean central banks won’t need to raise rates as much as previously expected.
That has helped push up global equities, which had been under pressure through February and March.
London stocks were boosted by upgraded data showing that the UK economy grew 0.1 percent in the fourth quarter of last year to narrowly avoid recession. An initial reading had output flat in the final three months of last year.
In Asia, stock markets built on gains as banking-sector worries faded and traders grew optimistic that central banks could be near the end of their rate-hiking cycle.
Hong Kong stocks were boosted also by a rally in tech firms after it emerged that e-commerce giant Alibaba’s logistics arm was preparing for a listing in the city.
News of the IPO by Cainiao Network Technology came after Alibaba said it intended to split into six units and go public.
Factory and services activity data suggesting that China’s powerhouse economy continued to improve also lifted confidence.

– Key figures around 1530 GMT –

New York – Dow: UP 0.7 percent at 33,083.33 points
London – FTSE 100: UP 0.2 percent at 7,631.74 (close)
Frankfurt – DAX: UP 0.7 percent at 15,628.84 (close)
Paris – CAC 40: UP 0.8 percent at 7,322.39 (close)
EURO STOXX 50: UP 0.7 percent at 4,315.05 (close)
Tokyo – Nikkei 225: UP 0.9 percent at 28,041.48 (close)
Hong Kong – Hang Seng Index: UP 0.5 percent at 20,400.11 (close)
Shanghai – Composite: UP 0.4 percent at 3,272.86 (close)
Euro/dollar: DOWN at $1.0865 from $1.0905 on Thursday
Pound/dollar: DOWN at $1.2373 from $1.2386
Euro/pound: DOWN at 87.80 pence from 88.04 pence
Dollar/yen: UP at 132.93 yen from 132.70 yen
Brent North Sea crude: UP 0.5 percent at $79.63 per barrel
West Texas Intermediate: UP 1.0 percent at $75.08 per barrel

APP/AFP

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M M Alam

M. M. Alam is a Pakistan-based working journalist since 1981. Karachi University faculty gold medalist Alam began his career four decades ago by writing for Dawn, Pakistan’s highest circulating English daily. He has worked for region’s leading publications, global aviation periodicals including Rotors (of USA) and vetted New York Times as permanent employee of daily Express Tribune. Alam regularly covers international aviation and defense-related events including Salon Du Bourget (France), Farnborough (United Kingdom), Dubai (UAE). Alam has reported thousands of events and interviewed hundreds of people in Pakistan, UAE, EU, UK and USA. Being Francophone Alam also coordinates with a number of French publications.