Global Stocks Rally Ahead of US Inflation Data: Markets Wrap

(Bloomberg) — Global equities headed for a fresh record after a tech-led rally on Wall Street, amid optimism Wednesday’s key US inflation report won’t undermine the case for Federal Reserve interest-rate cuts.

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European stocks gained and US equity futures were steady, while the MSCI All Country World Index extended its longest run of gains since January. In the run-up to US consumer price index data, the S&P 500 advanced despite Jerome Powell’s signals that interest rates will be higher for longer and a mixed reading on producer inflation.

Treasury yields ticked lower and a gauge of the dollar was flat before the consumer-inflation data, which is expected to show a slight moderation in price increases. Core CPI, which excludes volatile food and energy costs, is seen slowing to 0.3% month-on-month, from 0.4%.

“An in-line-with-consensus US core CPI read is discounted and in the price, but that may be enough to promote relief buyers and see the index push higher,” said Chris Weston, head of research at Pepperstone Group Ltd. “A core CPI read below 0.25% month-on-month and I certainly wouldn’t want to be short.”

Among individual movers in Europe, Experian Plc jumped as much as 8.7% after reporting full-year earnings. ABN Amro Bank NV dropped more than 5% after unchanged guidance. Burberry Group Plc declined, dragging the consumer goods sector lower, after reporting a slump in sales.

US producer prices climbed in April by more than projected, though key components that feed into the Fed’s preferred inflation gauge were more muted. Several categories in the PPI report that are used to calculate the personal consumption expenditures price index eased.

“A more granular look suggests the components that feed into PCE inflation sent mixed signals,” said Krishna Guha at Evercore. “This means that the burden largely remains on CPI.”

A survey conducted by 22V Research showed 49% of investors expect the market reaction to the CPI report to be “risk-on” — while only 27% said “risk-off.”

A gauge for benchmarks in Asia gained after closing at a two-year high Tuesday, with Taiwan Semiconductor Manufacturing Co. leading the advance. Shares in Japan ended little changed, while those in mainland China slipped. Hong Kong markets are closed for a holiday.

The offshore yuan edged higher, mirroring gains in other China-economy sensitive currencies including the Australian dollar and Thai baht, following a Bloomberg report that the government is considering a proposal to buy millions of unsold homes in an attempt to salvage the beleaguered property market.

In commodities, oil advanced after an industry report showed shrinking US stockpiles, and traders looked ahead to a report from the International Energy Agency that’ll shed light on market balances into the second half. Copper futures in New York rallied to a record high after a short squeeze that saw the most-liquid contract trading at a hefty premium. Gold steadied after rising almost 1% on Tuesday.

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