Volkswacht Bodensee - Markets rise as traders evaluate strong US economy

Traders have been tracking US data for months, with the general consensus being that, while good for the economy, a strong reading is bad for stocks as it adds pressure on the Federal Reserve to keep tightening monetary policy.

With this in mind, a massive half-a-million jump in new jobs last month was the spark for a sell-off across the world, and a prompt for central bank officials to warn rate hikes would need to go higher than expected and stay there longer.

News this week of a smaller-than-estimated drop in January inflation reinforced that view, further denting investor sentiment.

However, analysts said Wednesday's jump in retail sales -- the biggest since March 2021 -- may have led some to change their minds from the "good news is bad news" mantra, and that the economy could avoid a "hard landing", or recession.

Quincy Krosby, of LPL Financial, told Bloomberg Television that the gains were "telling us maybe we can keep going as long as inflation is coming down overall and growth is solid".

National Australia Bank's Rodrigo Catril added: "Strength in retail sales figures have been supported by a strong labour market... and as noted by the New York Consumer survey earlier in the week, the US consumer is not worried about losing their job.

"The main takeaway is that the US consumer remains in rude health and with inflation still too high for comfort, the Fed has no alternative but to keep lifting the funds rate."

All three main indexes on Wall Street initially sank on the latest figures before rebounding to end the day in the green.

And after a rocky week so far, Asia picked up the baton.

Hong Kong, Tokyo, Sydney, Seoul, Singapore, Mumbai, Bangkok, Wellington and Taipei were all well up, though Shanghai, Manila and Jakarta reversed earlier gains.

London, Paris and Frankfurt all rose at the open.

Stephen Innes, at SPI Asset Management, said traders could be attributing the retail sales figures to warm weather as people went shopping again after December's icy conditions.

"With January (inflation) likely echoing similar seasonality trends, it suggests the current data run was not the straw that broke the camel's back. Instead, the Fed is aware of seasonality trends and could wait to see how February pans out before calling for rolling thunder."

Still, there is a lot of nervousness on trading floors as investors try to gauge the outlook for the world's top economy.

"Everybody is trying to figure out whether this is going to be a once-in-a-lifetime soft landing or if it's just taking longer before we get a panic recession," said First American Trust's Jerry Braakman.

The dollar held gains against its major peers, having rallied Wednesday on expectations borrowing costs will continue to rise. And Bitcoin jumped more than 10 percent to around $24,550 -- its highest since August -- as traders tracked the positive mood across equity markets.

- Key figures around 0820 GMT -

Tokyo - Nikkei 225: UP 0.7 percent at 27,696.44 (close)

Hong Kong - Hang Seng Index: UP 0.8 percent at 20,987.67 (close)

Shanghai - Composite: DOWN 1.0 percent at 3,249.03 (close)

London - FTSE 100: UP 0.3 percent at 8,022.83

Euro/dollar: UP at $1.0710 from $1.0693 on Wednesday

Pound/dollar: DOWN at $1.2038 from $1.2039

Euro/pound: UP at 88.90 pence from 88.80 pence

Dollar/yen: DOWN at 133.88 yen from 134.12 yen

West Texas Intermediate: UP 0.9 percent at $79.30 per barrel

Brent North Sea crude: UP 0.7 percent at $85.95 per barrel

New York - Dow: UP 0.1 percent at 34,128.05 (close)

J.Horn--BTB