European stocks and US futures inched higher on Friday, with traders on alert for the impact on inflation of higher interest rates.
Europe’s region-wide Stoxx 600 rose 0.3 per cent after eurozone inflation fell more than expected and is on track to finish the quarter up more than 6 per cent.
Germany’s Dax — which is up more than a tenth since the start of the year — also rose 0.3 per cent, while London’s FTSE 100 was up 0.1 per cent after data showed the UK economy grew 0.1 per cent between the third and fourth quarters of 2022.
Contracts tracking Wall Street’s S&P 500 and the tech-heavy Nasdaq 100 both rose less than 0.1 per cent ahead of the New York open. Shares in Digital World Acquisition Corporation, the blank-cheque company that plans to take Donald Trump’s media outfit public, jumped 8 per cent in pre-market trading after the former president was indicted on criminal charges in New York.
The gains in stock markets came after Europe’s harmonised index of consumer prices slowed to 6.9 per cent in the year to March from 8.5 per cent in February as energy costs receded. Economists had expected prices to rise 7.1 per cent.
However, core inflation, which strips out volatile food and energy prices, rose to a fresh high of 5.7 per cent from 5.6 per cent, in line with forecasts. Unemployment across the euro area was unchanged at 6.6 per cent.
Analysts said the figures were unlikely to deter the ECB from raising rates by a quarter percentage point to 3.25 per cent when it next meets.
The euro fell 0.2 per cent against the dollar to $1.087 and the yield on the policy-sensitive two-year German Bund rose 0.02 percentage points to 2.76per cent. Bond yields move inversely to prices.
In the US, the February figure for the core personal consumption expenditures price index — the Fed’s preferred inflation gauge — is published on Friday. It is expected to have slowed to 5.1 per cent on a headline basis, year on year, from 5.4 per cent in January.
The latest inflation figures are likely to heavily influence how the US Federal Reserve approaches its next interest rate decision, and come against a backdrop of acute tension in the banking sector.
US government bond markets sold off slightly, with the yield on the two-year US Treasury note rising 0.03 percentage points to 4.13 per cent.
Asian equities advanced on Friday, buoyed by stronger than expected economic data in China.
Hong Kong’s Hang Seng index added 0.9 per cent, and China’s CSI 300 rose 0.3 per cent. South Korea’s Kospi and Japan’s Topix each advanced 1 per cent.
Activity in China’s non-manufacturing sectors grew at its fastest rate in more than a decade in March as business confidence rocketed and demand grew steadily, according to a closely watched official gauge.
“This strength won’t be sustained indefinitely, however,” said Julian Evans-Pritchard, head of China economics at Capital Economics. Much of the immediate boost from dismantling Covid-19 restrictions has “already passed” and the recovery is “likely to moderate over the coming months”.
Source: Economy - ft.com
