Stock markets, oil prices advance tracking inflation

F.P. Report

LONDON: Stocks markets and oil prices rose Thursday tracking the Israel-Hamas conflict, while the dollar steadied awaiting more US inflation data.

The International Energy Agency said the risk of oil supply disruptions owing to the conflict was limited, adding, however, that it stands ready to intervene in markets if necessary.

There has been plenty of optimism on equity trading floors in recent days after a US jobs report was neither too hot nor too weak, while a string of central bank decision-makers have lined up to suggest they backed a pause in any more monetary tightening.

In the latest remarks, Boston Fed chief Susan Collins said the policy board was being more patient now that rates were at or close to their peak, while Atlanta boss Raphael Bostic said that unless prices surged again, officials did not need to keep hiking.

And Governor Christopher Waller adopted a “watch-and-see” approach.

While the producer price index came in well above estimates Wednesday, analysts said it was seen more as a blip in a generally disinflationary environment.

The main focus is on the release of consumer prices on Thursday. “Any growth in the month-on-month figure would not go down well, particularly as the producer price inflation figures were hotter than expected,” noted Russ Mould, investment director at AJ Bell.

“The market is hanging on the Fed’s every word to see if it believes rate hikes are no longer necessary.”

Minutes from the Fed’s most recent policy meeting showed they would keep rates elevated “for some time” until inflation has been brought to heel.

“We do not forecast any additional rate hikes, but there are risks to this view depending on the evolution of GDP growth, labour market conditions, and inflation,” said HSBC’s Ryan Wang.

In Asia, the mood was enhanced by news that China’s massive sovereign wealth fund had bought stakes in the country’s biggest banks, fuelling speculation it could broaden its reach to support beleaguered mainland markets.

Hong Kong and Shanghai equity indices rallied on news that China’s Central Huijin Investment — an arm of the $1.4 trillion China Investment Corp — had bought $65 million of shares in the country’s banking giants.

Analysts said the purchase of stakes in Bank of China, Agricultural Bank of China, China Construction Bank, and Industrial and Commercial Bank of China was aimed at boosting sentiment in mainland markets, which have been hit by worries over the stuttering economy.

Huijin was also said to be planning to further boost its holdings. The banks were up between four and 5.5 percent in Hong Kong.

“The national team buying is a much bigger deal to the market and to confidence than the trove of measures including lowering the stamp duty in August,” said Li Fuwen, at Guangdong Value Forest Private Securities Investment Management.

“What the market is in desperate (need) of now is a fresh source of funds, and even if it is just a few hundred million a day, this is the way to salvage confidence.”

The move comes after a report said earlier this week that the government was looking at a huge sovereign bond issue to pay for infrastructure projects, the latest bid to prop up stalled growth. (APP)