NEW YORK, July 14 — World stock markets rallied yesterday and the euro hit a 17-month dollar peak, after easing US inflation stoked hopes the Federal Reserve’s long-running campaign of interest rate hikes could be near an end.

Asian and European equities bounded higher with London also shrugging off news of shrinking UK economic growth.

Wall Street stocks added to gains posted on Wednesday following the release of the soft inflation data, with more economic figures and corporate earnings reassuring investors.

Briefing.com analyst Patrick O’Hare said there is rising confidence that the US economy will avoid recession, that the Fed is close to being done raising rates, and that there will be a return to earnings growth in the second half of this year.

The European single currency soared above US$1.12, a level last seen in February 2022, while oil prices firmed.

Sterling hovered at a 16-month peak above US$1.31 as data showed the UK economy shrank just 0.1 per cent in May.

Soft landing

"With inflation slowing down faster than expected, the Fed’s tightening is producing the desired effect, and investors have started to price-in the end of the current hiking cycle,” said ActivTrades analyst Ricardo Evangelista.

"The markets can now see a path for a soft landing of the US economy, with inflation being controlled without the country... entering a serious recession.”

Traders already had a spring in their step this week on signs that the US central bank’s monetary tightening measures were kicking in.

The mood brightened Wednesday when the US Labor Department said the consumer price index came in at 3.0 per cent in June, the lowest annual rate since March 2021 and down from 4.0 per cent in May. The Fed’s target is 2 per cent.

Yesterday, US data showed that wholesale prices, measured through the producer price index, ticked up by 0.1 per cent last month, slightly less than expected.

Analysts also pointed out that, while showing signs of softness, the labour market was still robust and the economy remained in good health.

The broad-based S&P 500 rose nearly one percent to finish at 4,510.04, its highest close since April 5, 2022.

Asian stocks powered higher following the positive trading session on Wednesday on Wall Street, with Hong Kong climbing more than 2 per cent and Tokyo over 1 per cent.

Hong Kong’s tech giants were among the Hang Seng Index’s best performers on hopes that China’s crackdown on the sector is near an end.

That optimism was boosted by state media reports that Premier Li Qiang met representatives from industry leaders including Alibaba and TikTok’s Chinese counterpart Douyin on Wednesday.

Traders are also keeping watch for any statements out of Beijing after officials announced a series of pledges to support the struggling property sector and indicated other growth-boosting measures would be outlined.

Such expectations were boosted by data showing Chinese exports plunged more than 12 per cent last month while imports were also sharply down.

Key figures around 2030 GMT

New York - Dow: UP 0.1 per cent at 34,395.14 (close)

New York - S&P 500: UP 0.9 per cent at 4,510.04 (close)

New York - Nasdaq: UP 1.6 per cent at 14,138.57 (close)

London - FTSE 100: UP 0.3 per cent at 7,440.21 (close)

Frankfurt - DAX: UP 0.7 per cent at 16,141.03 (close)

Paris - CAC 40: UP 0.5 per cent at 7,369.80 (close)

EURO STOXX 50: UP 0.7 per cent at 4,391.76 (close)

Tokyo - Nikkei 225: UP 1.5 per cent at 32,419.33 (close)

Hong Kong - Hang Seng Index: UP 2.6 per cent at 19,350.62 (close)

Shanghai - Composite: UP 1.3 per cent at 3,236.48 (close)

Euro/dollar: UP at US$1.1230 from US$1.1129 on Wednesday

Dollar/yen: DOWN at ¥138.03 from ¥138.50

Pound/dollar: UP at US$1.3134 from US$1.2988

Euro/pound: DOWN at 85.47 pence from 85.69 pence

Brent North Sea crude: UP 1.6 per cent at US$81.36 per barrel

West Texas Intermediate: UP 1.5 per cent at US$76.89 per barrel

— AFP