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US and European stocks rise as investors look to inflation data

Global stocks opened on Monday with gains as investors looked ahead to upcoming economic data they hoped would ease the pressure on the US central bank to continue lifting interest rates.

Wall Street’s blue-chip S&P 500 index rose 0.7 per cent and the tech-heavy Nasdaq Composite added 0.9 per cent shortly after the New York open. US equities last week recorded their biggest five-day decline in two months.

In Europe, the region-wide Stoxx 600 rose 0.8 per cent with the FTSE 100 in London 0.6 per cent higher.

The moves come ahead of a crucial set of US inflation figures on Tuesday, with consumer prices expected to have risen 6.2 per cent in January, down from 6.5 per cent the previous month, according to economists’ forecasts compiled by Bloomberg. That would represent the smallest decrease in the annual rate of inflation since September.

However, Francesco Pesole, forex strategist at ING, said such a reading would probably embolden officials at the US Federal Reserve who wanted to raise rates more aggressively. That would increase the chances of a quarter percentage point rate rise in May. Investors expect a move of the same size at the US central bank’s next meeting in March.

“US data in January should be strong throughout, largely thanks to greatly improved weather conditions compared to December,” Pesole said. “The big jump in hiring seen in the latest jobs report also suggests increased demand.”

Michelle Bowman, a senior Fed official, on Monday said she expected “ongoing increases” in US rates would be needed to bring inflation back to the central bank’s 2 per cent target. “We are still far from achieving price stability, and I expect that it will be necessary to further tighten monetary policy to bring inflation down towards our goal,” Bowman said.

US stocks have declined and government bonds yields have jumped since data in early February showed the US added more than 500,000 jobs in the first month of the year, roughly triple the number that had been forecast. After a confident start to 2023, “investor positioning has turned decidedly more bearish”, said analysts at JPMorgan.

The two-year Treasury yield rose 0.03 percentage points to 4.54 per cent on Monday, its highest level since late November. The 10-year Treasury yield fell 0.02 percentage points to 3.72 per cent.

A measure of the dollar’s strength against a basket of six other currencies was stable. The yen slipped 1 per cent against the greenback to ¥132.70 as investors digested news of the expected appointment of academic Kazuo Ueda as the next Bank of Japan governor.

Brent crude, the international oil benchmark, declined 0.8 per cent to $85.64 a barrel, having risen just over 8 per cent last week. US marker West Texas Intermediate fell 0.9 per cent to trade at $79.02.

In Asia, Hong Kong’s Hang Seng index fell 0.1 per cent, Japan’s Topix declined 0.5 per cent and South Korea’s Kospi dropped 0.7 per cent. China’s CSI 300 added 0.9 per cent.

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