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Stocks rallied while the dollar slumped against rival currencies on Thursday after a drop in US inflation dimmed expectations of more aggressive Federal Reserve rate hikes. online news
The consumer price index (CPI), a key measure of inflation, rose at an annual pace of 7.7 percent in September.
That was below analyst expectations and a dip from the 8.2 percent rate in September.
The dollar plunged more than three percent against the yen, while the pound jumped 2.7 percent against the greenback and the euro rose 1.5 percent.
Meanwhile, stocks surged.
On Wall Street, the Dow gained nearly a thousand points in late morning trading, or 3.0 percent.
The broader S&P 500 jumped 4.5 percent and the tech heavy Nasdaq Composite soared 5.9 percent.
“Inflation has finally started to drop like a rock in the US and this is the best news that anyone can expect,” said AvaTrade analyst Naeem Aslam.
“The Fed will still continue to increase the interest rate but there is no need to be aggressive about this — which means that the pace of interest rate hikes will slow down now.”
The Fed’s main policy rate currently stands at between 3.75 to 4.0 percent, and investors have been keen on determining when policymakers will “pivot” away from its aggressive 0.75 percentage point hikes or “pause” them altogether.
Matt Weller at StoneX said that after the soft inflation reading traders are now pricing in an 80 percent chance the Fed will shift down to a 0.50 percentage point interest rate hike and now see rates peaking below 5.0 percent.
“This dovish shift has had an outsized impact on markets,” he said.
“There’s optimism that the worst of the selling may be behind us,” on equity markets, which are down heavily this year.
Covid & crypto
Markets are grappling also with the impact of strict zero-Covid measures in China, with supply chains and activity slowed by harsh lockdowns and testing policies.
“China’s domestic demand is weak and their key trading partners are entering recession territory,” said Edward Moya at OANDA trading group.
The crypto world has meanwhile been rocked by a surprise decision from Binance, the world’s biggest cryptocurrency platform, to scrap a possible acquisition of rival FTX.com a day after disclosing it had signed a non-binding letter of intent to buy it.
The near-collapse of FTX has plunged bitcoin to a two-year low.
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“FTX’s slump from over a $32 billion valuation to zero in less than a few days raises numerous issues,” said Stephen Innes at SPI Asset Management.
“Prominent investors are wearing eggs on their faces after diving in head first.”
He added that gold and silver would be the biggest beneficiaries of the crypto fallout with investors looking to the trusted precious metals for stability.
Key figures around 16:30 GMT
New York – Dow: UP 3.0 percent at 33,474.29 points
EURO STOXX 50: UP 3.2 percent at 3,846.56
London – FTSE 100: UP 1.1 percent at 7,375.34
Frankfurt – DAX: UP 3.5 percent at 14,146.09
Paris – CAC 40: UP 2.0 percent at 6,556.83
Tokyo – Nikkei 225: DOWN 1.0 percent at 27,446.10 (close)
Hong Kong – Hang Seng Index: DOWN 1.7 percent at 16,081.04 (close)
Shanghai – Composite: DOWN 0.4 percent at 3,036.13 (close)
Euro/dollar: UP at $1.0131 from $1.0017 Wednesday
Pound/dollar: UP at $1.1642 from $1.1352
Dollar/yen: DOWN at 143.15 yen from 146.37 yen
Euro/pound: DOWN at 87.20 pence from 88.19 pence
West Texas Intermediate: UP 1.2 percent at $86.85 per barrel
Brent North Sea crude: UP 1.3 percent at $93.84 per barrel
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