Global Stock Markets Rise, Treasury Yields Fall on Inflation Data

  • US Consumer Spending Rises, Inflation Rise Slows
  • Wall Street rises and breaks weekly losing streak
  • Treasury yields fall
  • Brent oil rises $2

NEW YORK, May 27 (Reuters) – Global markets enjoyed a broad-based rally on Friday, while benchmark U.S. Treasury yields fell after data showed consumer spending The US economy could be on track to grow this quarter.

Consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.9% last month, and while inflation continued to rise in April, it was lower than in recent months. The personal consumption expenditures (PCE) price index increased 0.2%, the smallest gain since November 2020. read more

Wall Street rallied on Friday after the data, with all three major US stock indexes decisively ending their longest weekly losing streaks in decades. read more

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The US Federal Reserve, in its May meeting minutes released earlier this week, called inflation a serious concern. Most central bankers backed two half-percentage-point rate hikes in June and July as the group tries to curb inflation without causing a recession.

The Fed left room for a pause in hikes if the economy weakens. read more

Analysts said consumer spending and inflation data were encouraging and supported second-quarter growth estimates that are mostly above a 2.0 annualized rate.

“The growth engine of the US economy is still alive and kicking, and that’s important,” said Joe Quinlan, head of CIO market strategy for Merrill and Bank of America Private Bank. “Growth estimates for (the second quarter) remain good. There is a better tone in the market than we have seen in recent weeks, in terms of inflation possibly peaking here. Maybe we can avoid the stagflation”.

The MSCI World Equity Index (.MIWD00000PUS), which tracks shares in 45 countries, was up 2.12% at 4:45 p.m. EDT (8:45 p.m. GMT).

Global equity funds saw inflows in the week to May 25 for the first week in seven weeks, according to Refinitiv Lipper. read more

European stocks (.STOXX) hit a three-week high and rose 1.42%. The UK FTSE (.FTSE) also hit a three-week high and headed for its best weekly result since mid-March.

The Dow Jones Industrial Average (.DJI) rose 575.77 points, or 1.76%, to 33,212.96, the S&P 500 (.SPX) gained 100.4 points, or 2.47%, to 4,158, 24 and the Nasdaq Composite <.IXIC<> added 390.48 points, or 3.33%, to 12,131.13.

The benchmark 10-year Treasury note yield was last 2.7432%. It had hit a three-year high of 3.2030% earlier this month on fears the Fed may have to raise rates quickly to control inflation.

The lower yields show that the Fed’s monetary policy is succeeding in tightening credit and slowing prices, BofA’s Quinlan said.

“The 10-year yield suggests we don’t have to break inflation above 9-10%,” Quinlan said. “We are approaching a peak in inflation.”

The two-year yield, rising on traders’ expectations of higher fed funds rates, fell to 2.4839%.

German 10-year bond yields fell 4 bps to 0.955%.

Asian stocks (.MIAPJ0000PUS) also benefited from hopes of stabilizing Sino-US ties and more stimulus from the Chinese government. read more

The United States would not prevent China from expanding its economy but wanted it to adhere to international norms, Secretary of State Antony Blinken said on Thursday, in remarks some investors saw as positive for bilateral ties. read more

Emerging market shares rose 1.98%. MSCI’s broader index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) closed 2.17% higher, while Japan’s Nikkei (.N225) was up 0.66%.

The turn to broadly positive market sentiment took the dollar to a one-month low against a currency index.

The dollar index fell 0.059% and the euro rose 0.06% to $1.073.

Oil prices were near two-month highs on the prospect of a tight market due to increased gasoline consumption in the United States in the summer, and also the possibility of an EU ban on Russian oil.

US crude rose 98 cents, or 0.86%, to $115.07 a barrel. Brent settled $2.03 higher, or 1.73%, at $119.43 a barrel.

Spot gold rose 0.2% to $1,852.83 an ounce.

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Reporting by Elizabeth Dilts Marshall in New York Additional reporting by Chuck Mikolajczak in New York, Carolyn Cohn in London, Stella Qiu in Beijing, and Kevin Buckland in Tokyo; Edited by Chizu Nomiyama, Alistair Bell and Matthew Lewis

Our standards: the Thomson Reuters Trust Principles.

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