US stocks lifted by benign inflation data, oil up again
AFP – Wall Street stocks rose Thursday following benign US inflation data, while oil prices streaked to another multi-year peak following President Donald Trump’s decision to exit the Iran nuclear accord.
US stocks notched a second straight day of solid gains after the Consumer Price Index, which tracks costs for household goods and services, rose 0.2 percent in April, below analyst expectations.
Analysts varied in their view of the data, with RDQ Economics saying it still expects inflation to soon exceed the Fed’s target and warning that higher oil prices could push prices even higher.
But the stock market’s reaction suggested investors broadly believe inflation remains tame and won’t prompt the Federal Reserve to accelerate its pace of interest rate increases.
"The CPI data is close to the Fed mandate on an annual basis, but the market remains happy as long as inflation is not accelerating out of control," said Adam Sarhan founder of 50 Park Investment.
All three major US indices closed higher, with the S&P 500 climbing 0.9 percent. European stocks also rose.
– Oil rises again –
Oil prices again finished at their highest level since late 2014 as Trump’s decision to exit the Iran nuclear accord and reinstate sanctions on the Middle Eastern country continued to reverberate.
On Thursday, the US Treasury together with the United Arab Emirates announced action to disrupt an alleged "large scale" currency exchange network run by Iran’s powerful Islamic Revolutionary Guard Corps.
The Treasury also singled out Iran’s central bank as "complicit" in the IRGC operation, alleging the bank gave the operation access to funds held in offshore bank accounts.
Analysts expect Trump’s moves this week to hit oil output, with loss of 500,000 barrels a day a "worse case" outcome, according to a JPMorgan Chase note.
And Schneider Electric said, "Turmoil for the Iran nuclear deal continues to be the main headline for this week’s trading, with the prospect of declining Iranian supply coming at a time when the market is already facing a fairly tight supply picture."
Besides the direct hit to supply, analysts said the oil market also was responding to rising tension throughout the conflict-prone oil-rich Middle Eastern region in the wake of Trump’s move.
"If the tension in the Middle East does not subside, oil prices are likely to push higher in the short-term," analysts at Cantor Fitzgerald said.
Elsewhere, the British pound slid after the Bank of England held its key interest rate at 0.50 percent and slashed the growth forecast for the British economy less than one year before Brexit.
The central bank now sees the British economy growing by 1.4 percent this year, compared to an earlier forecast of 1.8 percent growth, and inflation to fall more quickly.
FXTM research analyst Lukman Otunuga said the outlook provides "less reason to believe that the BoE will be in a hurry to raise UK interest rates", expectations of which had been supporting the value of the pound.
– Key figures around 2100 GMT –
New York – Dow: UP 0.8 percent at 24,739.53 (close)
New York – S&P 500: UP 0.9 percent at 2,723.07 (close)
New York – Nasdaq: UP 0.9 percent at 7,404.97 (close)
London – FTSE 100: UP 0.5 percent at 7,700.97 (close)
Frankfurt – DAX 30: UP 0.6 percent at 13,022.87 (close)
Paris – CAC 40: UP 0.2 percent at 5,545.95 (close)
EURO STOXX 50: DOWN 0.02 percent at 3,569.02 (close)
Tokyo – Nikkei 225: UP 0.4 percent at 22,497.18 (close)
Hong Kong – Hang Seng: UP 0.9 percent at 30,809.22 (close)
Shanghai – Composite: UP 0.5 percent at 3,174.41 (close)
Oil – Brent North Sea: UP 26 cents at $77.47 per barrel
Oil – West Texas Intermediate: UP 22 cents at $71.36 per barrel
Euro/dollar: UP at $1.1919 from $1.1851 at 2100 GMT
Pound/dollar: DOWN at $1.3516 from $1.3547
Dollar/yen: DOWN at 109.42 yen from 109.74 yen