US inflation falls, pushing stock markets higher around the world
Financial markets/economy
Posted by MoneyController on 15.11.2023
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US inflation came in below expectations in October, leading to a general rally in global equity markets in anticipation of a more likely rate cut.
Once again, the US inflation data has been widely welcomed. The data showed a slowdown in inflation: on a monthly basis, inflation did not rise, while on an annual basis it fell from 3.7% in September to 3.2% in October, which was even better than expectations (3.3%). On a twelve-month basis, inflation stands at 4%, slightly lower than in the previous month (4.1%).
Basic (or 'core') inflation - i.e. that which excludes energy and food prices, which are the most volatile elements of the basket - also fell on a month-on-month basis: +0.2% in October versus +0.3% in September (the latter figure was also in line with expectations).
The impact of these data was felt on most of the world's stock markets. The US market was the first to benefit from the data: the S&P 500 rose by 1.91% yesterday, the Dow Jones by 1.43% and the Nasdaq by 2.37%. Europe was also boosted by the US inflation data: the Stoxx600 rose by 1.3%, the DAX by 1.76%, the CAC 40 and FTSI Mib by around 1.4%, the Ibex by 1.72%; even the British FTSE 100, which had been in the red at midday, managed to recover and closed almost unchanged (+0.2%).
The Asian markets were even stronger, with the Japanese Nikkei up 2.52% and the Hong Kong stock exchange up 3.78%. More subdued, but still positive, were the Shenzhen and Shanghai bourses, up 0.59% and 0.55% respectively. The Korea Composite Stock Price Index in Seoul rose by 2.2%. The Australian share market also closed in positive territory, up 1.52%. However, the planned meeting between Xi Jinping and Joe Biden also played an important role in Asian market dynamics, as did some better-than-expected Chinese economic data.
Although there is no shortage of risks of a return to inflation (just think of the war in the Middle East, which could have sent oil prices much higher), market participants now seem increasingly confident that monetary policy will be eased in 2024. This is shown, for example, by the Cme Group's FedWatch tool, which in its forecasts sees the chances of the Fed cutting interest rates from 10.5% to 27% as early as March 2024.
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Inflation, stagflation and deflation
Central banks: rate hike looks over, but it's too early to talk about cuts
