Global Stocks Rally Ahead of US Inflation Data: Markets Wrap

(Bloomberg) — Global equities headed for a fresh record after a tech-led rally on Wall Street, amid optimism that Wednesday’s key US inflation report won’t undermine the case for Federal Reserve interest-rate cuts.

Most Read from Bloomberg

European stocks gained and US equity futures were steady, while the MSCI All Country World Index extended its longest run of gains since January. In the run-up to US consumer price index data, the S&P 500 advanced despite Jerome Powell’s signals that interest rates will be higher for longer and a mixed reading on producer inflation.

Meanwhile, Treasury yields edged lower and a gauge of the dollar softened before the consumer-inflation data, which is expected to show a slight moderation in price increases. Core CPI, which excludes volatile food and energy costs, is seen slowing to 0.3% month-on-month, from 0.4%.

“An in-line-with-consensus US core CPI read is discounted and in the price, but that may be enough to promote relief buyers and see the index push higher,” said Chris Weston, head of research at Pepperstone Group Ltd. “A core CPI read below 0.25% month-on-month and I certainly wouldn’t want to be short.”

A survey conducted by 22V Research showed 49% of investors expect the market reaction to the CPI report to be “risk-on” — while only 27% said “risk-off.”

“A downside surprise seems needed,” said Michael Leister, head of rates strategy at Commerzbank AG. “For one, break-evens have already corrected notably and thus should provide less support for the long-end from here. At the same time, the Fed will remain reluctant to give the all-clear considering the lack of disinflation progress.”

Among individual stock movers in Europe, Burberry Group Plc declined after reporting a slump in sales, dragging the consumer goods sector lower. ABN Amro Bank NV dropped more than 5% after unchanged guidance, while Finnish refiner Neste Oyj slumped on a downward revision on sales margins for its renewable products.

In the US, the meme-stock rally is set to continue with GameStop Corp. and AMC Entertainment Holdings surging for a third consecutive session.

The euro-zone economy started the year on a stronger footing than anticipated, growing 0.3% in the three months through March following a shallow recession in the latter half of 2023, data Wednesday confirmed. Inflation is likely to backpedal more quickly than previously anticipated, with growth picking up next year, according to the European Commission.

In contrast to the likely US path for interest rates, Bank of France Governor Francois Villeroy de Galhau said that the European Central Bank is very likely to start easing policy at its next policy meeting in June.

In commodities, oil held gains after an industry report showed shrinking US stockpiles, overshadowing a softer demand growth outlook by the International Energy Agency for the rest of the year.

Copper futures in New York rallied to a record high after a short squeeze that’s prompted a scramble to divert metal in other regions to US shores. Gold extended gains after rising almost 1% on Tuesday.

Key events this week: