Volkswacht Bodensee - Stocks rally on cooler US inflation, before ECB rate call

Investors were awaiting an expected cut in eurozone interest rates from the European Central Bank later in the day, ahead of a reduction from the US Federal Reserve next week as consumer-price rises return to relatively normal levels.

"Today sees traders turn their attention to European affairs, with the ECB expected to cut rates for just the second time in five-years," noted Joshua Mahony, analyst at traders Scope Markets.

"With markets essentially viewing a 25-basis point cut as a foregone conclusion, much of the day's focus will be on the outlook for the pace of easing going forward."

The euro steadied against the dollar ahead of the decision.

A US inflation reading Wednesday allowed investors to breathe a sigh of relief after a tough couple of weeks that have been filled with worries about the world's top economy, as a weak run of jobs figures stoked recession fears.

The Nasdaq closed up more than two percent Wednesday and the S&P 500 more than one percent.

The rally was fuelled by a big jump in the tech sector, with chip titan Nvidia rocketing more than eight percent.

And the positive mood flowed through to Asia, where Tokyo led gainers and jumped more than three percent after seven days of losses.

London, Paris and Frankfurt gained around one percent approaching the half-way mark in European trade.

The Fed is yet to cut borrowing costs after central banks around the world hiked aggressively when inflation soared as nations emerged from Covid lockdowns and following Russia's invasion of Ukraine.

This is in contrast to the European Central Bank, which on Thursday is widely expected to reduce eurozone interest rates for a second time in three months.

In the US, bets are surging on a 25-basis-point reduction, with talk of a 50-point shift muted by figures showing that core inflation on the consumer price index had seen an unexpected uptick.

A report on US wholesale prices due Thursday could provide more insight into the Fed's thinking.

Wednesday's "stronger than expected core CPI for August will no doubt weaken the case for a 50 basis point cut", Commonwealth Bank of Australia analyst Carol Kong told AFP.

"The inflation and labour market data are in line with a soft landing scenario in the US economy, rather than a recession. As such, we stick to our call for a 25 basis point cut next week."

- Key figures around 1045 GMT -

London - FTSE 100: UP 0.8 percent at 8,260.43 points

Paris - CAC 40: UP 0.9 percent at 7,462.28

Frankfurt - DAX: UP 1.2 percent at 18,55797

Tokyo - Nikkei 225: UP 3.4 percent at 36,833.27 (close)

Hong Kong - Hang Seng Index: UP 0.8 percent at 17,240.39 (close)

Shanghai - Composite: DOWN 0.2 percent at 2,717.12 (close)

New York - Dow: UP 0.3 percent at 40,861.71 (close)

Euro/dollar: UP at $1.1021 from $1.1018 on Wednesday

Pound/dollar: UP at $1.3053 from $1.3046

Euro/pound: UNCHANGED at 84.43 pence

Dollar/yen: UP at 142.71 yen from 142.38 yen

Brent North Sea Crude: UP 1.6 percent at $71.74 per barrel

West Texas Intermediate: UP 1.6 percent at $68.37 per barrel

M.Schneider--VB