Global stocks wavered while oil prices rallied on Wednesday as investors digested official data showing that US inflation cooled in March.
US consumer prices rose by 5.0 percent last month on an annual basis, down from 6.0 percent in February, the figures showed. It was the smallest increase since May 2021 and better than forecast by analysts.
But core inflation which excludes food and energy prices, accelerated to 5.6 percent in March from 5.5 percent the previous month.
European markets closed higher with a roller-coaster day for the Paris CAC 40, which hit a record high and fell at one point before finishing in the green.
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“In light of this inflation announcement, the probability of further significant interest rate hikes will now seem less likely,” said Srijan Katyal, global head of strategy at ADSS brokerage firm.
“This would be welcomed by those still calling on the Fed to take a steady, measured approach in the wake of the banking crisis that rippled across the world in March,” Katyal said.
Wall Street stocks initially rallied on hopes that the better inflation data could soon end US Federal Reserve’s (Fed) policy of aggressive interest rate hikes.
Interest rates hike expected
Despite this hope, analysts still expect the Fed to hike interest rates again next month albeit by just a quarter percentage point, smaller than several recent increases.
In a volatile session, US equities pulled back after a release of minutes from the Fed’s last meeting which showed the country’s central bank economists in March had projected a ‘mild recession’ later this year.
The broad-based S&P 500 ended down 0.4 percent.
“The minutes suggest that Fed officials are getting a little more nervous about the outlooks and the overall impact of the current banking turmoil,” said Oanda’s Edward Moya who also pointed to nervousness ahead of bank industry earnings later in the week.
Evidence of moderating inflation did help boost crude prices on expectations that the Fed will soon pause its stance, analysts said.
Futures of US benchmark contract West Texas Intermediate climbed 2.1 percent to finish at $83.26 a barrel, its highest level of 2023.
Source: The East African
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