London stocks hit record peak, dollar drops before US inflation

LONDON (AFP): The London stock market struck a record peak close to 8,000 points Tuesday on a wave of European optimism before vital US inflation data.

The dollar slid against main rivals on expectations that the rate of price rises has slowed in the world’s biggest economy — data that could ease the pace of more US interest rate rises.

Oil prices retreated, after recent gains fuelled by key producer Russia’s decision to curb output following more Western sanctions over Ukraine.

In London, the benchmark FTSE 100 shares index struck an all-time high 7,996.35 points in morning deals after reaching new heights in recent sessions.

“The tailwinds from another decent market performance in the US overnight have given the FTSE another boost, propelling it to a new record high and towards the psychologically important 8,000 barrier,” Interactive Investor analyst Richard Hunter told AFP.

“The index continues to attract investment interest with its exposure to banks and energy companies still seeing the benefits of rising interest rates and a recovering Chinese economy respectively.”

Shares in Vodafone won four percent after US telecoms giant Liberty Global snapped up a near five-percent stake in its British rival but ruled out a takeover.
Eurozone equities also climbed after bumper Wall Street gains Monday.

US consumer price index inflation, due 1330 GMT, was forecast to have dipped to 6.2 percent last month from 6.5 percent in December, according to Bloomberg.
That is still well above the Fed’s target of two percent, and analysts said a higher read on the CPI could spark a hefty sell-off on markets, with traders already worried the United States could tip into recession.

“There is a surprising amount of optimism in the markets again today considering we are just hours away from a hugely significant inflation report,” noted Oanda analyst Craig Erlam.

“The CPI data will need to over-deliver if the Fed is going to be convinced to stop tightening over the next couple of months, given the labour market remains red hot.”

Asian equity indices ended on a mixed note after a shaky couple of weeks, while the yen won support also as Japanese Prime Minister Fumio Kishida nominated respected economics professor Kazuo Ueda to take the helm at the Bank of Japan.

Ueda will be tasked with kickstarting the torpid Japanese economy while also facing pressure to join international peers in tightening monetary policy.