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The global stocks gauge rose on Thursday after the Federal Reserve released its expectations on consumer prices. Meanwhile, the dollar and longer-dated US Treasury yields fell as the Fed planned a leeway to scale back on interest rate hikes. Generally, the US consumer price index dropped for the first time in December after over two and a half years. Prices fell for goods such as gasoline, suggesting inflation had attained a sustained downward trend.
Another labor market reading indicated that the weekly initial jobless claims were about 205,000, below the 215,000 expectation. For that reason, many stock market participants are now considering signs of weakness within the employment market as an indicator of slowing inflation. Equities fell on Wall Street after the CPI index release, with the S&P 500 declining to as much as 0.8% and finally rebounding.
Friday involved impacts from several big US bankers that kicked off the fourth quarter earning period for the S&P 500 firms. On the other hand, the Nasdaq Composite rose to 11,001.11 or added 0.64%. The Dow Jones Industrial Average increased to 34,189.97 or gained 0.64% or 216.96 points. In the meantime, the pan-European STOXX 600 gauge increased by 0.63% to close at its highest mark since last year in April.
The MSCI’s gauge of stocks worldwide also rose after gaining 0.80%. This gain marked its longest streak since last year, August, notching its fifth consecutive gain. Thus, some investors have predicted a likely 50 basis point rate hike from the Federal Reserve. Other financial analysts are counting on a possible 25 basis point hike. In any case, the benchmark US 10-year note fell from 3.556% to 3.427% by 12.9 basis points.
The Federal Reserve chairman says that inflation data indicates that the US economy is primed for disinflation in 2023. He explained that the efforts to curb inflation through rate hikes are a step in the right direction. However, attaining the 2% inflation rate target will take a bumpy road. Overall, the dollar index attained its lowest level at $102.07 since early June before slightly paring losses.
The Japanese Yen rose at $129.18 per dollar by 2.56% against the greenback. The Sterling Pound rose by 0.60% to trade at $1.2215. Above all, crude oil prices increased after the consumer price index release to take in another boost from optimism over Covid-19 restrictions in China, resulting in an additional demand. Investors have now turned their concerns over the next Fed rate hike.