Stocks gain as inflation panic cools

16/02/2018 05:47 AST

World stock markets pushed higher on Thursday as investors shopped for bargains following a brutal correction sparked by inflation fears.

European stocks held on to morning gains, and New York stocks built on the previous day’s rebound in early Wall Street trading.

“US stocks are adding to a recent recovery in early action, continuing to show some resiliency in the face of another dose of hotter-than-expected inflation data,” the Charles Schwab brokerage said.

On Wednesday, the US reported a surprisingly strong rise in consumer prices, briefly spooking markets, but a weak retail sales report suggested that fears of an overheating American economy may be premature, analysts said. Hong Kong stocks ended the Year of the Rooster by leading a rally across Asian markets.

Global equities went into a tailspin last week on the prospect the US Federal Reserve will hike interest rates at a sharper pace then expected a few months ago in order to prevent a spurt in inflation from a resurgent US economy and improving wages.

But some analysts have suggested that the Fed will not be pushed into more aggressive rate hikes than the market has so far anticipated.

“There is a sense now that higher consumer prices could kill off consumer spending and weigh on the US growth rebound,” said Jasper Lawler, head of research at London Capital Group.

“Slower growth would keep a lid on wage and overall price pressures,” he added, “so the Fed will probably will not deviate from the three hikes priced in by the market.” Market analyst David Madden noted that the FTSE 100, DAX 30 and CAC 40 all hit one week highs Thursday as investors are regaining confidence.

“Equities continue to be in recovery mode as traders are still cautiously optimistic,” he said in a note to clients.

“Investors are viewing the smaller swings on global stock markets as a sign that a lot of the fear dissipated, and are content to buy back into the market,” he added.

Meanwhile in Asia, Hong Kong ended two per cent higher as traders headed into the Chinese New Year break. The index rose 5.6 per cent over the past three days, helping it bite into last week’s drop of more than nine per cent.

Tokyo ended 1.5 per cent higher, despite a surge in the yen against the dollar, which tends to hurt exporters. While equities ran higher, the dollar was in the dog house.

On currency markets the dollar took a hit across the board, with the yen at fresh 15-month highs, while the euro built on Wednesday’s gains that came after figures showed solid German economic growth. Although higher inflation and bond yields would normally be positive for the dollar, the analysts said other options were more attractive.

The Gulf Today