The MSCI world equity index climbed 0.6 per cent to its highest since mid-September, after a positive session in Europe and a rally across Asia, supported by a report of stimulus in China
World shares extended gains on Wednesday and the dollar stemmed losses as expectations of an end to a global interest rate hike cycle encouraged investors after benign inflation data in the U.S. and Europe.
By the end of the session the MSCI world equity index climbed 0.6 per cent to its highest since mid-September, after a positive session in Europe and a rally across Asia, supported by a report of stimulus in China.
Stocks also gained on the Wall Street. The S&P 500 Index added 0.2 per cent, the Dow Jones Industrial Average gained 0.5 per cent, and the Nasdaq Composite Index reduced earlier gains to close flat.
U.S. retail sales dropped in October, though by less than expected, giving some investors cause to celebrate that the U.S. economy is set for a so-called “soft landing” and that the Fed is likely done hiking rates.
Recent U.S. data “supports our view that consumer price inflation will continue to fall more rapidly than many expect, even as activity in the real economy holds up under the weight of higher rates,” economists at Capital Economics said in a note.
The pan-European STOXX 600 index added 0.4 per cent after data showed British inflation cooled more than forecast in October, hitting sterling and reinforcing speculations the BoE will be cutting rates by the middle of 2024.
Good weather seems to be back. The market is starting to price in the probability of rate cuts in the US and also in Europe, said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan.
I think the equity rally will continue into 2024 and so will bonds of course, subject to the international picture that remains complicated with the war in Ukraine, the Middle East and trade tensions with China, Franchini said.
The British CPI increased 4.6 per cent in the 12 months to October, slowing from September’s 6.7 per cent rise, the ONS said. Inflation in Italy and France also declined to an annual growth rate of 1.8 per cent and 4.5 per cent respectively last month, according to their statistics agencies.
On Tuesday, data showed U.S. headline consumer prices were flat in October, against expectations for a 0.1 per cent rise. Core CPI, at 0.2 per cent, also came in below a forecast of 0.3 per cent.
I think the CPI number has just pushed the last person to cover their shorts, Naka Matsuzawa, said Nomura’s chief macro strategist.
He sees a “more complicated” process ahead, where stock market exuberance eventually collides with bond market expectations that an economic slowdown will drive rate cuts.