(CercleFinance.com) – The US equity markets amplified their progress on Thursday, investors welcoming the latest indicators suggesting an upcoming slowdown in inflation.
At the end of the morning, the Dow Jones climbed 2.7% to 33,396 points, while the Nasdaq Composite climbed 5.7% to 10,945 points.
The participants welcomed with relief, one hour before the opening, the publication of inflation statistics removing the risk of accelerated monetary tightening.
Retail prices slowed more sharply than expected in October, as the rise in energy costs was tempered by a moderation in food prices.
Excluding energy and food, consumer prices rose just 0.3% last month, while analysts had forecast a 0.5% rise.
On an annual basis, so-called ‘core’ inflation stands at 6.3%, against 6.6% in September, where the market was hoping for a figure of 6.5%.
These figures confirm economists’ forecasts that the peak of inflation has passed, or is in the process of passing, pointing to a year 2023 marked by disinflation.
‘What a profound change in the ‘narrative’ on inflation, after two years of only price slippage rekindling the fear of reliving the episode of the 1970s’, believe the teams of Oddo BHF .
‘What also change the Fed’s policy with a stop to key rate hikes, in the absence of a bearish pivot’, adds the private bank.
The easing of inflation could allow the Fed to be a little more patient in its monetary tightening policy, an obviously buoyant factor for equities.
As a result, unbridled euphoria gripped the markets following the publication of the consumer price index and all 11 major S&P sector indices are on the rise.
Stocks linked to unconstrained consumption (+7.4%), real estate (+6.7%) and technology (+5.9%) topped the charts, while the sectors of energy (+1.7%), basic consumption (+1.6%) and health (+1.5%) bring up the rear.
On the interest rate side, the consumer price statistics, which support the scenario of an upcoming pause in the monetary tightening cycle, are causing US government bond yields to drop dramatically.
The yield on ten-year Treasuries fell heavily below 4% to reach a one-month low of 3.85%.
The dollar is also suffering from the moderation of inflation, which removes the prospect of a rapid rise in interest rates, to trade around the threshold of 1.0170 against the euro, the lowest since the summer.
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