Global stocks up as US inflation moderates

Beijing: Global stocks were mostly higher Thursday after US inflation eased and Federal Reserve officials said they expect fewer interest rate hikes this year to slow economic activity.

Tokyo, Hong Kong and Paris rose while Shanghai declined. London and Frankfurt opened little-changed. Oil prices edged lower. Wall Street futures were higher after government data showed US inflation declined to 5 per cent in March from the previous month's 6 per cent. That encouraged traders who hope signs of weaker economic growth might prompt the Fed and other central banks to postpone or scale down plans for more rate hikes. Also Wednesday, notes from the Fed's March 21-22 meeting showed officials agreed the next increase in its benchmark lending rate would be one-quarter percentage point instead of half a point. The notes showed Fed economists expect a “mild recession” but said that might be avoided. “If inflation is indeed moderating, and growth is no longer too strong, the Fed can pause with confidence,” said Stephen Innes of SPI Asset Management in a report.

In early trading, the FTSE in London held steady at 7,820.05. The DAX in Frankfurt was little-changed at 15,699.20 while the CAC 40 in Paris gained 0.8 per cent to 7,457.21. On Wall Street, futures for the benchmark S&P 500 index and the Dow Jones Industrial Average were up 0.1 per cent. On Wednesday, the S&P 500 index fell 0.4 per cent. About 65 per cent of stocks within the index fell. The Dow slipped 0.1 per cent and the Nasdaq composite lost 0.9 per cent. In Asia, the Shanghai Composite Index lost 0.3 per cent to 3,318.36 after customs data showed Chinese exports rose 14.8 per cent over a year earlier in March, unexpectedly rebounding from a contraction in January and February. The Nikkei 225 in Tokyo added 0.3 per cent to 28,156.97 while the Hang Seng in Hong Kong advanced 0.2 per cent to 20,344.48. The Kospi in Seoul rose 0.4 per cent to 2,561.66 while Sydney's S&P ASX fell 0.3 per cent to 7,324.10. India's Sensex lost 0.1 per cent to 60,335.51. New Zealand and Singapore advanced while Jakarta declined.

Traders are worried that the Fed and other central banks in Europe and Asia might tip the global economy into recession as they try to extinguish inflation that is near multi-decade highs. That anxiety was briefly drowned out by fears about the health of global banks following two high-profile failures in the United States and one in Switzerland. But regulators appear to have quelled those concerns by promising more lending and other steps if needed to stabilise banks. Traders are still largely betting the Fed will raise short-term interest rates by another quarter of a percentage point at its next meeting, according to data from CME Group. They shaded some bets toward the possibility that the Fed will merely hold rates steady in May, something it has not done for more than a year. The bond market shows nervousness about a potential recession.

The 10-year Treasury yield slipped to 3.41 per cent from 3.43 per cent late Tuesday. The two-year Treasury yield, which moves more on expectations for the Fed, fell to 3.96 per cent from 4.03 per cent.