(Bloomberg) — Stocks surged and Treasuries rallied as inflation in the world’s largest economy fell more than expected, easing pressure on the Federal Reserve’s tightening campaign.
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Both the S&P 500 and Nasdaq 100 jumped more than 3%. Treasuries rallied with the two-year rate, the most sensitive to monetary policy, tumbling 20 basis points. The dollar slid and oil erased losses in the minutes after the data release.
US Inflation Rises at Lowest Annual Rate Since January: TOPLive
Investors may treat the 7.7% headline figure as the latest evidence of peaking consumer-price growth, with potential to usher in an end to interest-rate hikes. The report also showed the consumer-price index coming in softer than expected on a month-on-month basis as well as in its core reading.
“The first downside surprise in inflation in several months will inevitably be received by an equity market ovation,” Seema Shah, chief global strategist at Principal Asset Management, wrote. A 0.5% hike, rather than 0.75%, in December is clearly on the cards but, until we have had a run of these types of CPI reports, a pause is still some way out.”
Philadelphia Fed President Patrick Harker said he expects the central bank to slow the pace of interest-rate hikes in upcoming months as US monetary policy approaches restrictive levels. But, he noted Thursday in the text of his remarks to the Risk Management Association’s Philadelphia chapter, a “ hike of 50 basis points would still be significant.”
Key events this week:
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Fed officials Lorie Logan, Esther George, Loretta Mester speak at events, Thursday
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US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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The S&P 500 rose 3.6% as of 9:30 a.m. New York time
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The Nasdaq 100 rose 5.2%
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The Dow Jones Industrial Average rose 2.7%
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The Stoxx Europe 600 rose 2.2%
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The MSCI World index rose 2.6%
Currencies
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The Bloomberg Dollar Spot Index fell 1.4%
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The euro rose 1.4% to $1.0148
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The British pound rose 2.4% to $1.1631
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The Japanese yen rose 2.3% to 143.16 per dollar
Cryptocurrencies
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Bitcoin rose 11% to $17,511.43
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Ether rose 17% to $1,294.66
Bonds
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The yield on 10-year Treasuries declined 18 basis points to 3.91%
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Germany’s 10-year yield declined 15 basis points to 2.03%
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Britain’s 10-year yield declined 13 basis points to 3.33%
Commodities
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West Texas Intermediate crude fell 0.3% to $85.59 a barrel
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Gold futures rose 1.7% to $1,743.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson.
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