NEW YORK: Wall Street stocks closed higher on Wednesday (Sept. 14) as strong US inflation data gave hope for a Federal Reserve interest rate hike on hopes of retracing some of yesterday’s losses.
The S&P 500 was up 0.3%. The dollar fell as crude oil prices rose.
US inflation data still dragged European and Asian equities lower, with London hardest hit in Europe following news that UK inflation slowed last month but close to 40-year highs.
US stocks decline on Tuesday based on consumer price index data reflects broader inflationary pressures, and although annual CPI momentum slowed in August, prices rose unexpectedly in the month compared to July.
The disappointing results forced investors to continue their battle against rising inflation with the Federal Reserve raising interest rates on another huge scale next week.
“Investors were squeezed yesterday because the inflation outlook was not as good as we thought and the Fed will likely have to raise rates more than we thought during the cycle,” said LBBW’s Carl Helling.
But Tuesday’s sell-off was “so big that today you have a small technical advantage. And that’s it, “he told AFP.
Hope for inflation?
Wednesday’s data showed only a slight slowdown in the producer price index due to falling energy costs, with oncoming inflation remaining high but offering hope for months to come.
Michael Hewson, market analyst at CMC Markets, said: “The decline suggests that inflationary pressures are easing, albeit not as drastically as possible.”
The Russian invasion of Ukraine, which increased energy and food costs, as well as supply chain tensions and the COVID-19 blockade in China,
The Fed has already set two consecutive hikes of 75 basis points, and a third such move is widely expected at next week’s policy meeting.
Following the latest inflation data in the US, some investors even predict that the Fed’s next hike could be a full percentage point.
Aggressive rate tightening by central banks around the world is putting a strain on economic activity as consumers and businesses face higher loan repayments.
In the UK, inflation slowed to 9.9 per cent in August but remained close to double digits.
The news strengthened the pound on hopes of another Bank of England interest rate hike next week.
Victoria Scholar, Head of Investments at Interactive Investor, said: “European markets are” locked in by a negative sentiment, which has taken over global markets. “
In Asia, Tokyo led the region’s losses, with the Nikkei down 2.8%.
Hong Kong stocks closed more than two percent with Chinese conglomerate Fosun hard hit by the media that the group was under regulatory scrutiny,