In This Article:
(Adds investor quote, updates prices)
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MSCI AC World index up 0.5%
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UK inflation falls to 4.6% in October
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China's factory output, consumption beat forecasts
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Fed funds futures price in rate cuts by May
By Danilo Masoni
MILAN, Nov 15 (Reuters) - World shares extended gains on Wednesday and the dollar nursed its losses as expectations of an end to a global rate hike cycle spurred on investors following benign inflation readings in the United States and across Europe.
The MSCI world equity index, which tracks shares in 49 countries, rose 0.5% to its highest since mid-September, following a positive session in Europe and a rally across Asia, aided by a report of stimulus in China.
The pan-European STOXX 600 index gained 0.6% after data showed British inflation cooled more than forecast in October, hitting sterling and reinforcing bets the Bank of England will be cutting rates by the middle of 2024.
"Good weather seems to be back. The market is starting to price in the possibility of rate cuts in the United States and also in Europe," said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan.
"I think the equity rally will continue into 2024 and so will bonds of course, subject to the international picture that remains complicated with the war in Ukraine, the Middle East and trade tensions with China," he added.
The British consumer price index rose by 4.6% in the 12 months to October, slowing from September's 6.7% increase, the Office for National Statistics said. Inflation in Italy and France also receded to an annual growth rate of 1.8% and 4.5% respectively last month, according to their statistics agencies.
On Tuesday, data showed U.S. headline consumer prices were flat in October, against expectations for a 0.1% rise. Core CPI, at 0.2%, also came in below a forecast of 0.3%.
"I think the CPI number has just pushed the last person to cover their shorts," Naka Matsuzawa, Nomura's chief macro strategist, said on the phone from Tokyo.
He sees a "more complicated" process ahead, where stock market exuberance eventually collides with bond market expectations that an economic slowdown will drive rate cuts.
DOLLAR SPUTTERS
On Tuesday, the Nasdaq jumped 2.4% and the small-cap Russell 2000 index leapt 5%, although gains were set to lose momentum with U.S. futures up around 0.3%.
The dollar sputtered after slumping on Tuesday following the softer U.S. inflation print. The dollar index, which measures the currency against a basket of peers, stood at 104.17, not far from Tuesday's two-month low of 103.98.