(Bloomberg) — Stocks advanced Friday after a reassuring reading on US inflation calmed traders’ worst fears on the outlook for interest rates and spurred fresh record highs on Wall Street.
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Banking and auto shares led gains as Europe’s Stoxx 600 index climbed 0.3%. Asian stocks rose, with Japan’s Nikkei 225 climbing 1.9% to its strongest-ever close near the 40,000 mark. The S&P 500 notched its 14th record this year on Thursday, while the Nasdaq 100 also hit an all-time high, boosted by a record close for tech megacap Nvidia Corp.
The moves came after the Federal Reserve’s preferred inflation measure on personal consumption expenditures rose in January at the fastest pace in nearly a year, but matched the forecasts of economists. Sentiment also got a boost from jobless claims data that indicated labor-market softening.
“The data came as a relief for those who were prepared for the worst,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Treasuries were steady after gaining for two sessions in a row. An index of the dollar was little changed.
The yen weakened against the greenback after Bank of Japan Governor Kazuo Ueda said its price target is not already in sight. His comment may temper speculation the bank’s first rate hike since 2007 could come as early as March.
Bitcoin rose for a seventh day, trading near $62,000 as demand from exchange-traded funds continues. BlackRock Inc.’s iShares Bitcoin Trust netted a record $612 million inflow on Wednesday.
China’s factory activity shrank for the fifth straight month in February, suggesting weak demand remains an obstacle for the economy. A gauge of non-manufacturing activity was in expansion mode, helped by a pickup in travel and tourism during a recent long holiday.
The country’s home-sales slump dragged on last month, even as regulators stepped up efforts to salvage the beleaguered property market. The value of new home sales from the 100 biggest real estate companies slid 60% from a year earlier.
Meanwhile, the US PCE report failed to dent the broader disinflationary trend underpinning rate-cut forecasts.
“For markets keenly focused on when the Fed will transition toward easing rates, this report will help restore confidence that it isn’t ‘if’ the Fed will begin to cut rates in 2024, but ‘when,’” said Quincy Krosby at LPL Financial.
Federal Reserve Bank of San Francisco President Mary Daly said central bank officials are ready to lower interest rates as needed, but emphasized there’s no urgent need to cut given the strength of the economy. Her Atlanta counterpart Raphael Bostic said the central bank could begin cutting this summer.
The Cleveland Fed’s Loretta Mester said inflation data out Thursday showed that policymakers have more work to do to cool price pressures, but said it didn’t change her expectation that the Fed will cut interest rates three times this year.
Oil was on track for a modest weekly gain as market gauges continued to show signs of strength, with OPEC+ set to decide early this month whether to extend supply cuts into the next quarter.
Key Events This Week:
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Eurozone S&P Global Manufacturing PMI, CPI, unemployment, Friday
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BOE chief economist Huw Pill speaks, Friday
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US construction spending, ISM Manufacturing, University of Michigan consumer sentiment, Friday
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Fed’s Raphael Bostic and Mary Daly speak, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 rose 0.3% as of 8:51 a.m. London time
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S&P 500 futures were little changed
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Nasdaq 100 futures rose 0.2%
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Futures on the Dow Jones Industrial Average were little changed
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The MSCI Asia Pacific Index rose 0.4%
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The MSCI Emerging Markets Index rose 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0812
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The Japanese yen fell 0.5% to 150.68 per dollar
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The offshore yuan was little changed at 7.2142 per dollar
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The British pound was little changed at $1.2635
Cryptocurrencies
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Bitcoin rose 1.1% to $62,077.07
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Ether rose 2.5% to $3,435.63
Bonds
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The yield on 10-year Treasuries advanced three basis points to 4.28%
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Germany’s 10-year yield advanced six basis points to 2.47%
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Britain’s 10-year yield advanced seven basis points to 4.19%
Commodities
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Brent crude was little changed
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Spot gold fell 0.2% to $2,039.32 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson and Pearl Liu.
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