Stocks climb after US inflation dips

AFP | London                                                           

The Daily Tribune – www.newsofbahrain.com

Major stock markets rose yesterday after US and European inflation slowed, renewing hopes for interest rate cuts. The personal consumption expenditures (PCE) price index -- the US central bank’s favored measure of inflation -- rose at an annual rate of 2.4 percent in January, down from 2.6 percent in December, the Department of Commerce said.

Fed officials have been debating the right time to start lowering rates, which currently stand at a 23-year high. A number of officials have recently suggested the Fed can afford to be patient before it begins cutting rates, given the underlying strength of the US economy.

“The key takeaway from the report will revolve around the year-over-year disinflation and the softening in real personal spending, which should temper first quarter GDP growth forecasts,” said Patrick O’Hare, analyst at Briefing.com.

“So, disinflation paired with slower growth are conditions the market will think are going to promote rate-cut thinking at the Fed in due time.” All the main US indexes opened higher yesterday. Expectations for rate cuts have shifted to later this year after earlier data showed inflation still hot in the world’s biggest economy, while the stock market has been supported by healthy profits at major corporations.

In Europe, data showed inflation eased further in Germany, France and Spain. Eurozone inflation figures are due Friday. Stocks were higher in London and Frankfurt, while the Paris CAC 40 index reached a fresh intra-day high before giving up those gains, pulled lower by Air France-KLM which slumped seven percent after annual profit fell short of expectations as it fell into a final-quarter loss. The dollar was little changed against main rivals, while bitcoin rallied further to reach $63,500. A trader works on the floor of the New York Stock Exchange Oil prices were largely flat.