NEW YORK – Global stocks closed out a strong week with most bourses gaining yesterday as markets took a benign view of recent inflation data and greeted progress on a US infrastructure package.
Markets had jumped on Thursday after the Bank of England (BoE) maintained its ultra-low interest rates, echoing the views of the US Federal Reserve and the European Central Bank that inflationary spikes are only temporary.
Traders have for months worried that the blistering global recovery will fan price increases and force rate hikes – but central bankers have sought to downplay inflation risks.
“That BoE meeting did alleviate fears of a hawkish swing across the central banks, but ultimately, whether the BoE or the Fed are right will come down to the trajectory of inflation over the coming months,” IG analyst Joshua Mahony said.
The Dow suffered its worst week since October last week due in part to a shift in messaging from the Federal Reserve.
But equities recovered this week, as investors greeted statements from Fed Chair Jerome Powell and other top central bankers that signalled no plans for an abrupt pivot in their easy money policies.
Inflation disagreement
Also this week, a parade of Fed speakers showed “most” are sanguine about inflation, “but some are getting nervous”, said Chris Low of FHN Financial.
“At the moment, there’s no way to know for certain which group is closer to the truth,” Low said.
Yesterday, investors shrugged off Commerce Department data that showed the personal consumption expenditures price index spiked 3.9% in May if compared with the same month last year.
Markets were also driven by anticipation of another injection of federal spending into the US economy, after President Joe Biden on Thursday said a deal had been reached with a bipartisan group of lawmakers to spend nearly US$1 trillion (RM4.1 trillion) on infrastructure.
The broad-based S&P 500 ended at 4,280.70, up 0.3% and a second straight record. The index added 2.7% for the week.
Earlier, London stocks showed a gain of 0.4% as trading ended for the week, while Frankfurt was slightly stronger and Paris was slightly softer.
Improving demand
Markets in Asia had rallied following the strong US session on Thursday.
The oil market also remained upbeat, reaching highs last seen in 2018 as traders grow increasingly confident that strong demand will improve further as the recovery progresses.
Among individual companies, Dow member Nike surged more than 15% after reporting blowout earnings and projecting solid sales growth through 2025, as it touts its ramp-up of direct selling of sports merchandise to consumers.
FedEx dropped 3.6% as it reported better than expected profits, but warned of higher labour costs. – AFP, June 26, 2021
