Markets comforted by further signs of easing US inflation

Tamer-than-expected inflation numbers triggered a broad rally in US equities Wednesday, with the S&P 500 Index and Nasdaq Composite rising to 15-month highs, as investors grew increasingly hopeful the Federal Reserve’s interest rate-hiking campaign could be nearing an end.  Financial companies were among the strongest performers yesterday together with energy shares.  Optimism about a peak in interest rates had the opposite effect on the US dollar index, which weakened for the fifth straight day and hit its lowest point since April 2022.  Meantime, European equities managed to outperform, with the Euro Stoxx 50 Index extending its gains in the afternoon, to close 1.7% higher at 4,360 points. 

Summary for 13.07.2023 

• Most Asian equities rose sharply on Thursday, tracking the overnight rally on Wall Street.  Gains were heavily biased towards the technology sector, given that it was the most pressured by a spike in borrowing costs over the past year.  Signs of easing Chinese regulatory pressure on the country’s technology giants also aided sentiment, as did speculation over more stimulus measures from Beijing.  The Hang Seng index led the region higher with an over 2% gain, while the S&P/ASX 200, Kospi, Nikkei 225 and Shanghai Composite indices also advanced. 
• European and US shares are poised to extend gains amid optimism over the Fed’s rate outlook. 
• Oil prices rose this morning, hovering near three-month highs as softer-than-expected US inflation data helped ease some anxiety over rising interest rates.  Gains were however limited as traders also digested recent data showing an unexpected build in US inventories over the past week, while other indicators showed that gasoline demand was weakening despite the travel-heavy summer season. 

• China’s exports fell 12.4% in June year-on-year, while imports contracted 6.8%, customs data showed on Thursday, suggesting manufacturers are struggling to find buyers while overseas economies wrestle with inflation and rising interest rates.  Economists had on average forecasted exports to have shrunk 9.5% and imports to have fallen 4.0%.  The drop in exports was the worst since the onset of the Covid-19 pandemic more than three years ago.  
• The annual inflation rate in the US slowed to 3% in June, the lowest since March 2021, compared to market expectations of 3.1% and May’s 4%.  Also, core inflation surprised on the downside falling to 4.8%, the lowest since October 2021.  On a monthly basis, the CPI rose by 0.2%, slightly more than the 0.1% in May but less than the consensus of 0.3%. 
• Domino’s Pizza yesterday rose nearly 11% after the company announced US consumers can now order its products through Uber’s Uber Eats and Postmates apps. 
• Beyond Meat, shares soared nearly 14% in regular trading Wednesday after the maker of plant-based meat alternatives said Tuesday that its steak product would be sold at about 14,000 stores across the US.