European, US stocks rise on hopes of inflation slowdown

LONDON (AFP): European and US stock markets rose Monday as investors set aside Asian losses and focused on expectations of slowing inflation in Britain and the United States, dealers said.

London and Frankfurt stocks were up 0.5 percent in afternoon trading, while Paris stocks advanced by 0.8 percent.

On Wall Street, the Dow edged up 0.1 percent as trading got underway.
“The expectation is inflation will have eased slightly when the US and UK report tomorrow and Wednesday respectively,” said AJ Bell investment director Russ Mould.

Patrick O’Hare, analyst at at, said investors “are taking a somewhat guarded stance” before the data release.

The Bank of England, the European Central Bank and the US Federal Reserve ramped up interest rates last year in efforts to tame sky-high inflation.

While US inflation has been trending down for several months, data showing the jobs market remained very tight in January indicated the world’s top economy was still robust.

The employment reading led a number of Federal Reserve officials to insist there was still plenty of work to do before they were happy they had prices under control.
“These comments were particularly noteworthy given that they explicitly pushed back against the narrative of rate cuts by year end, which markets had started to assume would be coming fairly soon,” said Michael Hewson at CMC Markets.

In Asia on Monday, equities fell on growing expectations that US interest rates will go much higher and stay there for longer than previously thought.

Sentiment in Europe was also boosted by news that the eurozone economy was forecast to narrowly avoid recession this winter.
The 20-nation area’s economy is now expected to expand by 0.9 percent instead of 0.3 percent, as “favourable developments” helped it weather fallout from Russia’s invasion of Ukraine, the European Union’s executive arm said.

Inflation in the eurozone is also expected to slow more than previously forecast after the war sent oil and gas prices soaring last year.

Oil prices retreated Monday, having jumped more than two percent Friday in reaction to Russia’s decision to slash output by 500,000 barrels per day.

The move came after a Western price cap that was imposed on exports in retaliation for Moscow’s war on Ukraine.

“Oil prices are falling as investors focus on near-term demand concerns, overshadowing news on Friday that Russia will cut oil production,” said market analyst Fiona Cincotta at City Index.

Those concerns included Chinese inflation data last Friday coming in lower than expected, “suggesting that the ramping up of the country’s economy after Covid could take some time,” she added.