Recovery hopes lift global stocks to record highs as US and China inflation in focus

US and China currency notes. Photo: StudioEAST/Getty Images
US and China currency notes. Photo: StudioEAST/Getty Images

Recovery hopes saw global stocks hit all-time highs on Wednesday, but European and US stocks dipped ahead of a speech by US Federal Reserve chair Jerome Powell.

MSCI’s global and Asian stock indices hit new highs on Wednesday, while US stocks also opened at record highs. US president Joe Biden’s stimulus plans continued to boost confidence, while concerns over monetary tightening in China eased as figures showed new bank loans hitting a new high.

But US and European indices reversed early gains. Britain’s FTSE 100 was up 0.4% and the Europe-wide Stoxx 600 (^STOXX) up 0.3% mid-afternoon trading, but were down 0.2% and 0.3% respectively by the end of the session.

France’s CAC 40 (^FCHI) lost 0.4%, and Germany’s DAX (^GDAXI) 0.6%. German chancellor Angela Merkel said lockdown restrictions would last into March, while data showed French industrial output falling 0.8% between December and January. Analysts had expected 0.2% growth.

US stocks opened higher but were largely down as trading finished in Europe. The S&P 500 (^GSPC) lost 0.2%, the Dow Jones (^DJI) was flat, and the Nasdaq (^IXIC) and the Russell 2000 (^RUT) were down more than 0.3%.

Inflation data was in focus on Wednesday in the world’s two largest economies.

Producer price index data in China showed a 0.3% rise in prices year-on-year, higher than expected and the largest growth since May 2019. Investors welcomed the gains as a signal of the manufacturing sector’s recovery.

Meanwhile consumer price index data in the US shortly before Wall Street opened showed prices up 1.4% year-on-year in January, unchanged on January’s rate despite expectations of a 0.1 percentage point increase. Prices were up 0.3% month-to-month.

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Stocks had rallied in Asia overnight. The Chinese inflation data lifted the blue-chip CSI 300 (000300.SS) 2.1% to its highest level since 2007. The Shenzhen Component (399001.SZ) also rose 2.1% in the final trading day before the Lunar New Year holiday, and the SSE Composite index (000001.SS) gained 1.4%.

Japan’s Nikkei rose 0.2% after strong earnings reports from carmakers Toyota and Honda, while MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.9% to a record high.

“Equity markets everywhere, including the US, remain at or near all-time highs,” wrote Jeffrey Halley, senior Asia-Pacific market analyst at OANDA.

“The only possible blip being the US Inflation data this morning. With the Democrats seemingly intent on rolling the stimulus package through mostly unchanged, over Republican objections, as a higher print then 1.60% for the core inflation number, tonight could see inflation fears make a temporary return.”

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