LDN - Business

Stocks skip to record highs ahead of US inflation data

[July 11, 2024] By Marc Jones

LONDON (Reuters) - World stocks hit new all-time highs on Thursday as traders counted down to U.S. data that is expected to show inflation easing and pave the way for the Fed to start its long-awaited interest rate cut cycle as soon as September.

It was a busy day. As well the U.S. CPI figures, Wall Street earnings season was kicking off. Britain had robust GDP data and some European soccer success to cheer, and a number of central banks were juggling interest rates.

Europe's main bourses moved 0.4%-0.7% higher in early trading, which after records in both the U.S. and Tokyo overnight, meant MSCI's main all-country world index scaled its own new peak. [.EU]

Bond markets and the dollar were broadly steady, keeping the yen on the weak side of 161 per dollar and near its lowest levels in decades, whereas it gave the sterling the room to climb to a 4-month high.

"Don't be too surprised that because we've had some good GDP numbers, we have a seemingly stable government and we are into a European final that we have an outburst of marginal post-election optimism for sterling," Societe Generale's Kit Juckes said.

Overnight, Japan's Nikkei had risen 1% to a record high of 42,426 points [.T] Taiwanese stocks did the same, and Australia's ASX 200 closed within a whisker of its all-time top.

That was after another surge in Nvidia and other Wall Street heavyweights had seen both the Nasdaq and S&P 500 close at new peaks. [.N]

"The main driver is really the prospect of interest rate cuts," said Shane Oliver, chief economist and head of investment strategy at AMP in Sydney. "If we get a good inflation read, it will tick one of Powell's boxes."

U.S. Federal Reserve Chair Jerome Powell told lawmakers on Capitol Hill on Wednesday that "more good data" would build the case for the U.S. central bank to cut interest rates. Futures pricing implies about a 75% chance of a cut in September.

Economists forecast annual U.S. CPI slowed to 3.1% in June from 3.3% in May.

The Bank of Korea stood pat on interest rates but left out a warning on inflation, while Governor Rhee Chang-yong told reporters that it was time to prepare to pivot to rate cuts. Malaysia held its rates steady too.

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A sign of Beijing Stock Exchange is seen at a counter during an organised media tour, in Beijing, China February 17, 2022. REUTERS/Florence Lo/File Photo

The U.S. earnings season will also begin later in the day, with results from Delta Air Lines and consumer bellwether PepsiCo, followed by bank results on Friday. [.N]

CHINA LAGGING

China's yuan rallied from an almost eight-month low to 7.2701 per dollar. [CNY/]

China stocks chimed with the market momentum, but a drumbeat of disappointing data and talk of tariffs in its major export markets have made rallies hard to sustain. China GDP print is due on Monday.[.HK][.SS]

Back in Europe, sterling's 4-month high of $1.2874 came after British GDP data beat expectations and after the Bank of England's chief economist on Wednesday had sounded vaguer about the timing of rate cuts than many traders had expected.

The euro also ticked higher to $1.0847.

The yen slipped as far as 161.7 per dollar. Data showed Japan core machinery orders unexpectedly down for a second month running, challenging expectations for interest rates to rise.

The New Zealand dollar found support at its 200-day moving average and traded at $0.6095. The Australian dollar rose 0.2% to a six-month high of $0.6763. [AUD/]

Treasuries were steady in Europe, with U.S. two-year yields holding at 4.62% and benchmark 10-year yields at 4.29%. [US/]

In commodity trade, oil prices edged higher on signals of strong U.S. gasoline demand. Brent futures rose 16 cents, or 0.2%, to $85.24 a barrel. U.S. crude climbed 20 cents, or 0.25%, to $82.30 a barrel. [O/R]

Gold also crept 0.5% higher to $2,381 an ounce. After a selloff last week, bitcoin has steadied around $58,900.

(Additional reporting by Tom Westbrook in Singapore; Editing by Andrew Heavens and Hugh Lawson)

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