US stocks rise as investors bet on lower interest rates

US stocks rose on Thursday after lower-than-expected inflation data boosted traders’ expectations that the economy would experience a mild slowdown this year.

The blue-chip S&P 500 rose 0.7%, while the tech-heavy Nasdaq rose 1.4% at noon in New York.

In Europe, the Stoxx 600 across the region rose 0.4%, London’s FTSE 100 rose 0.3% and Germany’s Dax rose 0.1%. France’s Cac 40 posted a notable gain of 1.1% as strong earnings from LVMH boosted demand for luxury stocks.

Traders were relieved by the figures that showed US core producer price index fell 0.1% in March. His initial unemployment claims were also slightly higher than expected at 239,000.

“There is a time lag in the employment data because of how the law calculates when people are laid off,” said Steven Blitz, chief U.S. economist at TS Lombard. “This may be the first shot over the bow. The unemployment rate will start rising faster than people expect, and then the Federal Reserve will start cutting. [interest rates]”

Minutes of a March Federal Open Market Committee meeting released Wednesday showed officials forecast a “moderate recession” starting later this year before the economy recovers over the next two years. showed.

Headline inflation fell to 5%, the lowest level since July, according to US economic data. However, core CPI, a metric the Fed prefers to filter out volatility in food and energy prices, rose from 5.5% to 5.6%.

Investors are weighing the impact of the data against the prospect of a contracting economy at the Fed’s next meeting in May. They are more confident that lower inflation will persuade the Fed to moderate the pace of interest rate increases to counter consumer price pressures.

Refinitiv data shows the swaps market has a 70 percent chance of rising by 0.25 percentage points.

In Europe, investors are pricing in a more hawkish trajectory from the European Central Bank, with almost a two-thirds chance of a 0.25 percentage point upside and a roughly one-third chance of a 0.25 percentage point upside.

ECB governor Robert Holtzman said Wednesday that the central bank should raise interest rates by 0.5%.

European industrial production data released on Thursday was 1.5%, higher than expected and 0.5 percentage points higher than the previous month. His 10-year government bond yield in Germany was flat at his 2.36%.

Two-year Treasurys fell 0.03 points to 3.94%, while 10-year Treasurys fell flat at 3.41%.

“We expect the environment for equities to remain challenging in the coming months as the U.S. economy cools and a Fed pivot is not imminent,” said Mark Häfele, chief investment officer at UBS Global Wealth Management. increase.

The euro rose 0.6% against the dollar to its highest level in a year. The Dollar Index, which measures the US dollar against six peer currencies, fell 0.6%.

In Asia, Hong Kong’s Hang Seng Index rose 0.2% while China’s CSI 300 fell 0.7%. US stocks rise as investors bet on lower interest rates

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