World shares are on the rise and the dollar is experiencing losses as investors anticipate the end of a global rate hike cycle. This follows benign inflation readings in the United States and Europe. The MSCI world equity index, which tracks shares in 49 countries, rose 0.5 percent to its highest level since mid-September. This positive session was observed in Europe and Asia, with China announcing stimulus measures.
The pan-European STOXX 600 index also saw gains of 0.6 percent after data revealed that British inflation had cooled more than expected in October. This news impacted sterling and reinforced the belief that the Bank of England will cut rates by mid-2024. Carlo Franchini, head of institutional clients at Banca Ifigest in Milan, expressed optimism, stating, “Good weather seems to be back. The market is starting to price in the possibility of rate cuts in the United States and also in Europe.”
The Office for National Statistics reported that the British consumer price index rose by 4.6 percent in the 12 months to October, which is a slowdown from September’s 6.7 percent increase. Additionally, inflation in Italy and France receded to annual growth rates of 1.8 percent and 4.5 percent respectively last month.
In the United States, data showed that headline consumer prices were flat in October, contrary to expectations of a 0.1 percent rise. Core Consumer Price Index (CPI) came in at 0.2 percent, below the forecast of 0.3 percent. Naka Matsuzawa, Nomura’s chief macro strategist, commented on this development, stating, “I think the CPI number has just pushed the last person to cover their shorts.”
The dollar experienced a slump following the softer U.S. inflation print, with the dollar index standing at 104.17, not far from its two-month low of 103.98. Interest rate futures now indicate the likelihood of an interest rate cut by the U.S. Federal Reserve as early as May. Furthermore, 10-year Treasury yields dropped by 19 basis points on Tuesday, the most significant one-day drop since March. However, they rebounded by 3 basis points to 4.47 percent. Ten-year German bond yields remained relatively stable.
Attention now turns to U.S. retail sales data and an expected meeting between U.S. President Joe Biden and Chinese President Xi Jinping in San Francisco. Sterling slid by 0.3 percent to $1.246 due to the cooler inflation print, which partially reversed Tuesday’s surge against a falling dollar. London stocks performed well, rising by 0.9 percent. The euro also saw a slight decrease of approximately 0.2 percent against the dollar.
China provided further cause for market optimism with its strong industrial output and retail sales data. MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 2.7 percent, hitting its highest level since mid-September. The Hang Seng in Hong Kong recorded a nearly 4 percent increase as mainland property developers rallied by over 5 percent. China’s retail sales rose by 7.6 percent in October, although this may have been influenced by the Golden Week holiday at the beginning of the month. Despite this positive news, real estate remains in decline, with investment down 9.3 percent year-on-year.
London copper prices also benefited from the weaker dollar and the expectation of more stimulus in China, remaining near a five-week peak. Furthermore, iron ore rallied to a 2-1/2 year high in Shanghai, rising by 0.7 percent. Brent crude futures experienced a reversal, trading down by 0.36 percent at $82.17 a barrel.
More detail via www.theepochtimes.com here… ( Image via www.theepochtimes.com )