FTSE 100 muted as global stocks rally after US inflation steadies

The FTSE 100 was muted as cooling US inflation buoys markets. Photo: Richard Baker/In Pictures via Getty

European shares opened mixed on Thursday after new figures showed inflation steadying in the world’s largest economy.

In London, the FTSE 100 (^FTSE) was flat after the opening bell, the CAC (^FCHI) climbed 0.5% in Paris and in Frankfurt the DAX (^GDAXI) rose 0.3.

Consumer prices in the US increased 8.5% in the 12 months to July, a slower rise than in the month before and below economists’ forecasts of 8.7%. Core prices remained steady at 5.9%.

The numbers published on Wednesday also showed that on a month-on-month basis, there was no increase in inflation last month compared with the 1.3% monthly rise in June.

Read more: UK house prices on the rise despite fall in new buyer inquiries

“European markets finished at their highest level in 2 months yesterday after US CPI surprised to the downside,” Michael Hewson, chief markets analyst at CMC Markets said. “The bigger than expected fall in the headline number, along with the weaker than expected core reading, has prompted the hope that the Federal Reserve may not need to be as aggressive on rate hikes when it meets to raise rates in September.”

Across the pond, Wall Street indices rallied on Wednesday as investors bet the Federal Reserve will temper aggressive interest rates rises.

The Nasdaq composite (^IXIC) led the charge, closing up 2.9%. That takes the tech-heavy index’s gains to 20.7% from its lows in June, officially entering a new bull market.

The benchmark S&P 500 (^GSPC) added 87.77 points, or 2.1%, to 4210.24, while the Dow Jones (^DJI) advanced 1.6% after the closing bell.

Steve Clayton, fund manager at HL Select, said: “Wall Street raced higher yesterday evening after new inflation data showed a slower than expected pace of price increases. Investors took this as a sign that the scale of US interest rate rises could be less than first feared and bid stocks higher.

“Investors might have been cheered, but the Federal Reserve was keen to pour cold water over the markets’ ardour, with officials stressing that rates were going to keep on rising until the Fed was confident that inflation was heading back to its 2% target.”

Asian stock markets made strong gains overnight as relief from Wednesday’s softer US inflation print buoys global markets, but finished mixed.

Japan’s Nikkei (^N225) lost 0.7%, while the Hang Seng (^HSI) edged 2% higher in Hong Kong and the Shanghai Composite (000001.SS) gained 1.6% in China.

Watch: How does inflation affect interest rates?

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