Volkswacht Bodensee - Stocks climb, dollar sinks as Fed seen ending rate hikes

Asian and European equities bounded higher with London also shrugging off news of shrinking UK economic growth.

Wall Street stocks added to gains posted on Wednesday following the release of the soft inflation data, with more economic data and corporate earnings reassuring investors.

Briefing.com analyst Patrick O'Hare said there is rising confidence that the US economy will avoid recession, that the US Federal Reserve is close to being done raising rates, and that there will be a return to earnings growth in the second half of this year.

The European single currency soared to $1.1200, a level last seen in February 2022, while oil prices firmed.

Sterling hovered at a 15-month peak above $1.31 as data showed the UK economy shrank just 0.1 percent in May.

- Soft landing -

"With inflation slowing down faster than expected, the Fed's tightening is producing the desired effect, and investors have started to price-in the end of the current hiking cycle," said ActivTrades analyst Ricardo Evangelista.

"The markets can now see a path for a soft landing of the US economy, with inflation being controlled without the country... entering a serious recession."

Traders already had a spring in their step this week on signs that the US central bank's monetary tightening measures were kicking in.

The mood brightened Wednesday when the US Labor Department said the consumer price index came in at 3.0 percent in June, the lowest since March 2021 and sharply down from 4.0 percent in May. The Fed's target is two percent.

On top of that, the "core" rate, which excludes the volatile food and energy components and is seen as a better sign of underlying inflation, sank to its lowest since 2021.

The readings follow last week's better-than-hoped personal consumption expenditures data -- seen as the Fed's preferred gauge -- and stoked bets that it will hike just one more time before calling it quits.

Analysts also pointed out that, while showing signs of softness, the labour market was still robust and the economy remained in good health.

Asian stocks powered higher following the positive trading session on Wednesday on Wall Street, with Hong Kong climbing more than two percent and Tokyo over one percent.

Hong Kong's tech giants were among the Hang Seng Index's best performers on hopes that China's crackdown on the sector is near an end.

That optimism was boosted by state media reports that Premier Li Qiang met representatives from industry leaders including Alibaba and TikTok's Chinese counterpart Douyin on Wednesday.

Traders are also keeping watch for any statements out of Beijing after officials announced a series of pledges to support the struggling property sector and indicated other growth-boosting measures would be outlined.

Such expectations were boosted by data showing Chinese exports plunged more than 12 percent last month while imports were also sharply down.

"The rise in oil prices this week continues to be tempered by concern over Chinese demand, after this morning’s disappointing trade numbers," said CMC Markets analyst Michael Hewson.

- Key figures around 1530 GMT -

New York - Dow: UP 0.1 percent at 34,384.03 points

London - FTSE 100: UP 0.3 percent at 7,440.21 (close)

Frankfurt - DAX: UP 0.7 percent at 16,141.03 (close)

Paris - CAC 40: UP 0.5 percent at 7,369.80 (close)

EURO STOXX 50: UP 0.7 percent at 4,391.76 (close)

Tokyo - Nikkei 225: UP 1.5 percent at 32,419.33 (close)

Hong Kong - Hang Seng Index: UP 2.6 percent at 19,350.62 (close)

Shanghai - Composite: UP 1.3 percent at 3,236.48 (close)

Euro/dollar: UP at $1.1193 from $1.1129 on Wednesday

Dollar/yen: DOWN at 138.15 yen from 138.50 yen

Pound/dollar: UP at $1.3096 from $1.2988

Euro/pound: DOWN at 85.46 pence from 85.69 pence

Brent North Sea crude: UP 0.6 percent at $80.58 per barrel

West Texas Intermediate: UP 0.5 percent at $76.16 per barrel

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O.Lorenz--BTB