Global stocks rise on US inflation data, upbeat fourth quarter earnings

A global equities gauge rallied on Wednesday while the dollar fell with Treasury yields after data showed core US inflation rose less than expected in December, raising hopes that the Federal Reserve could ease rates further. 

Investors also cheered the first wave of US bank earnings reports. 

The Bureau of Labor Statistics said the consumer price index (CPI) rose at an annual rate of 2.9 per cent in December, from November's 2.7 per cent, in line with expectations for 2.9 per cent. 

But core inflation, which excludes food and energy prices, rose by 3.2 per cent below forecasts for an annual rise of 3.3 per cent. 

Adding to the upbeat tone for the stock market were bumper fourth-quarter results from the likes of JPMorgan, which reported its biggest annual profit on record on Wednesday, top asset manager BlackRock, which logged a record $11.6 billion in assets, and Goldman Sachs, which saw its profit more than double in the final three months of 2024. 

"I think the market reaction is a pivot back to 'the Fed can lower rates if it wants to', as opposed to being boxed in a corner where higher inflation would keep them from acting," said Oliver Pursche, senior vice president and advisor at Wealthspire Advisors, Westport, Connecticut. 

"So, the reality is right now investors are looking at the data as kind of a Goldilocks scenario where you have strong corporate earnings, a very resilient and strong economy and lower inflation. You just can't ask for more than that." After the data, traders of interest-rate futures were pricing close to even odds the Federal Reserve would cut interest rates twice by the end of this year, with the first reduction to come in June. 

On Wall Street, at 10:40 a.m. the Dow Jones Industrial Average rose 623.77 points, or 1.47 per cent, to 43,142.05, the S&P 500 rose 94.60 points, or 1.62 per cent, to 5,937.73 and the Nasdaq Composite rose 426.64 points, or 2.25 per cent, to 19,470.57. 

MSCI's gauge of stocks across the globe rose 12.19 points, or 1.46 per cent, to 846.60. Europe's STOXX 600 equity index rose 1.33 per cent. 

BOJ RATE RISE? 

The US dollar lost ground against a basket of currencies after the data. Japan's yen was already boosted overnight, as traders priced in a 70 per cent chance the Bank of Japan would raise interest rates in January after Governor Kazuo Ueda said policy-makers would discuss such an option next week. 

The dollar index, which measures the greenback against major currencies, fell 0.32 per cent to 108.85. 

The euro was up 0.14 per cent at $1.0321, while against the Japanese yen the dollar weakened 1.11 per cent to 156.22. 

Sterling strengthened 0.34 per cent to $1.2256. 

In fixed income, US Treasury yields fell after the inflation data implied that a 2025 rate hike, which some investors had entertained, was off the table for now. When, or by how much, the Fed might cut was still up for debate, however. 

"There was a growing fear that inflation pressures would cause the Fed to have to even contemplate raising rates in the near term and that's taken off the table just a bit," said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company. 

"It doesn't mean that the Fed is going to ease. I think they're on hold. But just in general, you've seen rates rise quite a bit over the past few weeks, which has been a distraction for equity markets. Today's (data) pushes that to the back burner a bit for now." 

The yield on benchmark US 10-year notes fell 13.9 basis points to 4.649 per cent, from 4.788 per cent late on Tuesday, while the 30-year bond yield fell to 4.867 per cent from 4.985 per cent. 

The 2-year note yield, which typically moves in step with Fed interest rate policy expectations, fell 9.7 basis points to 4.268 per cent, from 4.365 per cent late on Tuesday. 

Oil prices rose on Wednesday as the market focused on potential supply disruptions from US sanctions on Russian energy companies and tankers carrying Russian oil. 

US crude rose 1.65 per cent to $78.78 a barrel and Brent rose to $80.86 per barrel, up 1.18 per cent on the day. 

Spot gold rose 0.12 per cent to $2,680.49 an ounce. US gold futures rose 1.12 per cent to $2,707.60 an ounce.