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US, EU stock markets rise as inflation fears fade

LONDON: US and European markets surged Thursday on upbeat economic data and fading fears that rising inflation will prompt central banks to withdraw stimulus measures sooner than expected.
The Bank of England was the latest major central bank to maintain ultra-low interest rates as it echoed the views of the US Federal Reserve and its fellow institution in the eurozone that inflationary spikes are only temporary.
Wall Street jumped into record territory after the open while London, Frankfurt and Paris closed higher. In Asia, equities traded mixed as investors took a breather after the latest rally.
“US stocks are gaining ground in early action, with the markets making another run at fresh record highs, with concerns about premature tightening of monetary policies globally waning,” said analysts at Charles Schwab brokerage.
The Bank of England kept its interest rate at 0.1 percent, and although it warned that inflation would likely top 3.0 percent, it would be “for a temporary period”.
Both the US Federal Reserve and European Central Bank kept their own ultra-low rates and economic support measures intact in recent weeks, insisting that high inflation is a temporary side-effect from the global rebound.
Traders have for months worried that the blistering global recovery will fan inflation and force officials to act.
The Fed rattled nerves last week when it suggested for the first time it could lift borrowing costs in 2023, a year earlier than initially targeted.
A number of top officials have since tried to tame expectations.
“The biggest debate in the market is if inflation is transitory or permanent,” said JJ Kinahan, chief market strategist at TD Ameritrade.
“As that debate plays out and more data arrive, it wouldn’t be surprising to see the current pattern of equity market trading without great conviction continue until earnings start in mid-July.”
Both the S&P 500 and Nasdaq stood above their all-time closing highs following data that included a confirmation of strong 6.4 percent US growth in the first quarter.
Other data released by the US government showed a rise in durable goods orders in May and a modest decline in weekly jobless claims.
In Europe, a report on German business confidence came in at a near three-year high.
– Oil seesaws –
Oil prices seesawed after Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said OPEC and other major producers had a part in “taming and containing inflation, by making sure that this market doesn’t get out of hand”, according to Bloomberg News.
Brent North Sea crude was up 0.1 percent at over $75 per barrel while the West Texas Intermediate was flat at around $73 after both fell earlier in the day.
A sharp rise in commodities this year has also played a key role in the global spike in inflation.
Salman’s comments come days ahead of the latest output policy meeting of the group with crude prices sitting around multi-year highs.
Oil has rallied this week to hit October 2018 peaks on Wednesday, propelled by hopes of a global demand recovery.
– Key figures at 1545 GMT –
New York – Dow: UP 0.7 percent at 34,109.20
London – FTSE 100: UP 0.5 percent at 7,109.97 points (close)
Frankfurt – DAX 30: UP 0.9 percent at 15,589.23 (close)
Paris – CAC 40: UP 1.2 percent at 6,631.15 (close)
EURO STOXX 50: UP 1.1 percent at 4,122.43 (close)
Tokyo – Nikkei 225: FLAT at 28,875.23 (close)
Hong Kong – Hang Seng Index: UP 0.2 percent at 28,882.46 (close)
Shanghai – Composite: FLAT at 3,566.65 (close)
Euro/dollar: FLAT at $1.1926 from $1.1926 at 2100 GMT
Pound/dollar: DOWN at $1.3907 from $1.3964
Euro/pound: UP at 85.76 pence from 85.41 pence
Dollar/yen: DOWN at 110.91 yen from 110.96 yen
Brent North Sea crude: UP 0.1 percent at $75.28 per barrel
West Texas Intermediate: FLAT at $73.04 per barrel

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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.