Global stock markets jump as US inflation drops to 7.7%


Global stock markets rose as the US inflation figure fell from 8.2% in September and cooled more than economists had expected. Photo: Stefan/Reuters

Wall Street and European stock markets reversed losses in Thursday afternoon trading on news that US inflation slowed more than expected.

Inflation fell last month to 7.7%, the lowest since January 2022, as the Federal Reserve raised interest rates to rein in prices that have jumped at a historic pace.

That figure was down from 8.2% in September and fell more than economists had expected.

In October alone, prices rose 0.4%, while core annual inflation fell to 6.3% from 6.6%.

In London, the FTSE 100 (^FTSE) was up 1.3% at the end of the session, after starting the day in the red, while the CAC (^FCHI) climbed 1.9% in Paris, and the Frankfurt DAX (^GDAXI) was 3.3% higher.

It also came as UK businesses cut the hiring of new workers for the first time since the COVID lockdowns in February 2021 as they struggled to find staff.

Permanent investments fell in October, the first drop in 20 months, according to the latest report from KPMG and REC.

The data revealed that starting wage inflation fell to its lowest level in 18 months as the labor market cooled.

Separately, consumer confidence fell to its lowest point since the early days of the COVID-19 pandemic, after the mini-budget overturned optimism.

The latest consumer confidence report from YouGov and Cebr revealed that people are the most pessimistic since the first lockdowns in April 2020.

Across the pond, the S&P 500 (^GSPC) jumped 4.3% on European time, and the tech-heavy Nasdaq (^IXIC) rose 5.8%. The Dow Jones (^DJI) edged up 2.8%.

Stuart Clark, portfolio manager at Quilter Investors, said: “Inflation in the US has fallen again, giving some impetus that the worst is now behind us. The rate is below expectations and this will provide relief to consumers and the wider market, but it should be noted that food and housing continue to rise, so not completely out of the woods yet.

“Inflation also remains stubbornly high, however, and as such the Federal Reserve is going to remain in a hawkish mood for some time to come.

“The jobs market remains strong, so until inflation is this high and the economy does not completely shut down, the market will have to wait for any indication of a pivot or pause from the central bank.”

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Meanwhile Seema Shah of Principal Asset Management said: “A rise of 0.5%, rather than 0.75%, in December is clearly on the cards but, until we have had a series of these types of CPI reports, a break is still a bit Let the market take advantage of it today, it still has about 100 basis points of tightening to sympathize with.”

The British pound (GBPUSD=X) jumped 2.5% against the dollar immediately after the inflation figures, while government bond yields across the world fell sharply as investors cut their bets on future rate hikes.

The pound is now on course for the best day against the dollar since March 2020.

Watch: How does inflation affect interest rates?

Asian markets fell overnight, with the Nikkei (^N225) falling 1% on the day in Japan, while the Hang Seng (^HSI) fell 1.7% and the Shanghai Composite (000001.SS ) fell 0.4%.

Market sentiment deteriorated as the likely collapse of a major crypto exchange spooked investors.

Read more: Crypto Tanks After FTX Implosion

FTX, one of the largest cryptocurrency exchanges in the world, is on the verge of collapse after talks with its main rival over an emergency bailout failed.

Binance said in a statement, “Our hope was to be able to help FTX customers provide liquidity, but the issues are beyond our control or our ability to help,” according to the Wall Street Journal.

FTX founder Sam Bankman-Fried reportedly told investors the company needed up to $8 billion in funding after an increase in customer withdrawal requests.

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