Volkswacht Bodensee - Stocks rise as cooling US inflation boosts rate cut hopes

Markets were already taking their cue before Wall Street opened after Federal Reserve boss Jerome Powell hinted Wednesday at a September cut to US rates.

June consumer price index (CPI) inflation figures came in lower than anticipated at 3.0 percent from a year ago with a 0.1 percent month-on-month decline for the first time since 2020, Labor Department data showed.

The data prompted President Joe Biden to hail "significant progress" and analysts to suggest rate cuts will soon follow.

Following the data release, the dollar shed more than two percent against the yen, which has been battling a series of four-decade historic lows, while the sterling reached a four-month high against the US unit.

Citing downward inflation momentum, Powell had said Wednesday decision-makers would not wait until inflation had hit the bank's two percent target before loosening monetary policy.

"The market will likely take this as support for a September rate cut, and take equities higher and lower US yields," said Ryan Brandham, heead of global capital markets, North America at Validus Risk Management.

"This is a reassuring number for the Fed -– (but) the question is, is it reassuring enough to give them comfort to lower rates in September?"

In early trading on Wall Street the Dow just crept into the green but Frankfurt, Paris and London were all showing gains of around 0.5 percent two hours from the European close.

Traders ramped up bets on the Fed reducing borrowing costs in two months.

The comments soothed recent fears among investors that officials might keep rates at their two-decade high for some time owing to a still strong labour market and inflation staying stubbornly above two percent.

In Britain, official data showing the UK economy has grown faster than thought boosted the pound, with analysts saying it could force the Bank of England to delay cutting its interest rates until September.

The upbeat mood filtered through to Asia earlier, where Hong Kong stocks jumped two percent and Tokyo, Shanghai and Sydney all rose.

Eyes are also turning to the start of China's Third Plenum gathering on Monday, where top officials including President Xi Jinping are expected to discuss ways to kickstart the world's number two economy in the face of an ongoing property crisis and geopolitical issues.

Andrew Batson, of Beijing-based consultancy Gavekal Dragonomics, told AFP he did not expect a "fundamental departure from the course Xi has already laid out", in which technological self-sufficiency and national security outweigh economic growth.

- Key figures around 1400 GMT -

New York - Dow: UP 0.2 percent at 39,806.53

London - FTSE 100: UP 0.3 percent at 8,217.95 points

Paris - CAC 40: UP 0.7 percent at 7,629.89

Frankfurt - DAX: UP 0.6 percent at 18,518.54

EURO STOXX 50: UP 0.7 percent at 4,991.19

Tokyo - Nikkei 225: UP 0.9 percent at 42,224.02 (close)

Hong Kong - Hang Seng Index: UP 2.1 percent at 17,832.33 (close)

Shanghai - Composite: UP 1.1 percent at 2,970.39 (close)

Pound/dollar: UP at $1.2939 from $1.2848 on Wednesday

Euro/dollar: UP at $1.0893 from $1.0833

Dollar/yen: DOWN at 158.15 yen from 161.71 yen

Euro/pound: DOWN at 84.23 pence from 84.29 pence

Brent North Sea Crude: DOWN 0.4 percent at $84.76 per barrel

West Texas Intermediate: DOWN 0.1 percent at $82.03 per barrel

G.Haefliger--VB