Equity markets rally, as the euro briefly rises

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German central bank chief Joachim Nagel has signaled that the European Central Bank (ECB) is likely to continue raising its key rate

FRED TANNEAU

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Stock markets rallied on Monday, building on pre-weekend momentum as investors anticipated further interest rate hikes aimed at tackling decades-high inflation.

The euro surged against its main rivals, a day after German central bank chief Joachim Nagel signaled that the European Central Bank (ECB) is likely to continue raising its key rate.

Europe’s single currency climbed more than 1.4% against the dollar and 1.6% against the yen before paring its gains around midday.

The ECB raised the key rate by a historic 75 basis points last week, and markets are expecting a hike of a similar magnitude at a meeting in October.

Stock markets in Paris and Frankfurt rose more than 2% by mid-afternoon, with London not far behind as data showed the UK economy rebounded slightly in July.

Tokyo closed with a gain of more than one percent thanks to a weaker yen. Markets in Hong Kong, mainland China and South Korea were closed for a public holiday.

Investors around the world await key US inflation data for August, due on Tuesday, with the consumer price index (CPI) expected to edge down to 8%, still well above the 2% target from the Fed.

Traders expect the Fed to impose another big rate hike next week, after already two 75 basis point hikes.

Clifford Bennett, chief economist at ACY Securities, said he expects stocks to “continue to rise” ahead of Tuesday’s CPI data.

The inflation figure “could well see further improvement as gasoline prices continued to decline,” he said.

Oil prices gained more than one percent on Monday but remain under pressure from the possibility of weaker global demand as growth slows and China’s tough zero-Covid policy continues to undermine the economic activity.

U.S. Treasury Secretary Janet Yellen said on Sunday that she hoped the U.S. economy could avoid a recession, but that the Fed would need to manage interest rates skillfully and also rely on “a bit of luck to achieve this.” what we sometimes call a soft landing”.

“I hope we achieve a soft landing, but Americans know that getting inflation down is key, and longer term, we can’t have a strong labor market without inflation in check,” she told CNN.

Yellen said that as the growth rate of the US economy slowed, the job market remained “exceptionally strong”, with nearly two openings for every job seeker.

Tuesday’s release of the Consumer Price Index “will provide revealing inflation data that will influence the market’s outlook on the Fed’s approach to monetary policy,” said analyst Patrick O’Hare of Briefing. .com.

London – FTSE 100: UP 1.5% to 7,462.13 points

Frankfurt – DAX: UP 2.2% to 13,368.57

Paris – CAC 40: +2.1% to 6,341.10

EURO STOXX 50: UP 1.96% to 3,640.18

New York – Dow: UP 0.7% to 32,387.10

Tokyo – Nikkei 225: 1.2% higher at 28,542.11 (close)

Hong Kong – Hang Seng Index: closed for public holidays

Shanghai – Composite: closed for public holidays

Euro/dollar: UP at $1.0116 against $1.0046

Pound/dollar: UP to $1.1679 from $1.1587

Euro/pound: DOWN to 86.60 pence vs. 86.84 pence

Dollar/yen: UP to 142.66 yen from 142.56 yen

North Sea Brent: +1.5% to $94.20 a barrel

West Texas Intermediate: UP 1.4% to $88.02 a barrel

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