Stocks rise as investors cheer US inflation relief

By Amanda Cooper and Wayne Cole

LONDON/SYDNEY (Reuters) – Global shares rose on Monday after U.S. inflation data raised some hopes of further policy easing next year, as well as relief that Washington has averted a government shutdown.

Following recent central bank decisions, this week there are only minutes from some of those meetings, while there is no Federal Reserve speech and US data is secondary.

The main market themes remain largely the same, with the dollar based on a relatively strong economy and higher bond yields, which in turn weighs on commodities and gold.

European markets have been on fire over the past few weeks as investors doubled their holdings in US equities and the dollar.

The STOXX 600, which was 0.15% lower, is on track to lose 4% this quarter, its worst quarterly performance in 2-1/2 years, while the S&P 500 has gained 3%.

The euro has hit a two-year low in recent weeks and is headed for its weakest quarterly performance against the dollar since the second quarter of 2022, down 6.5%.

Investors have grown pessimistic about the outlook for the euro zone economy, especially in light of US President-elect Donald Trump’s threat to impose heavy tariffs on regional exports at home.

“We have adjusted our path slightly lower for the euro/dollar for next year, while risks are tilted towards an even stronger dollar, as most of the topics on Trump’s agenda – lower taxes and deregulation, trade wars, massive “including deportations and a controversial attitude – have the potential to boost the dollar,” said Nordea strategist Jan von Gerich.

Political turmoil in the euro zone’s two key engines of growth – Germany and France – has hit investor confidence in Europe, while the US economy shows no real signs of weakness, with employment rising and inflation slowing. is slowing down and business activity is proving strong. Which has taken the S&P 500 to a record high this year.

“In the US, the economy is still proving resilient, but the impact of Donald Trump’s election is leading to sharply divergent trends,” strategists at asset manager Edmond de Rothschild said in a note.

In Asia, Japan’s Nikkei rose 1.2%, while the Topix automaker index climbed 1.3% on signs of progress in a potential merger between Honda and Nissan.

The MSCI All-World Index, which has gained 16% this year, was up 0.2% on the day.

Looking at the start of trading on Wall Street, S&P 500 futures were up 0.3%, while Nasdaq futures rose 0.5%. The S&P 500 fell nearly 2% last week and the Nasdaq fell 1.8%, although the latter is still up 30% for the year.

US futures are indicating about two quarter-point cuts in prices for next year, which would bring the benchmark rate to a range of 3.75-4.0%. Just two weeks ago, this expectation was closer to the 3.50-3.75% range.

As a result, 10-year Treasury yields have risen sharply, rising nearly 42 basis points in two weeks to about 4.54%, the largest such increase since April 2022.

In currency markets, the dollar index hit a two-year high of 107.96, up nearly 2% this month. The euro fell 0.2% to $1.0409, falling from a two-year low of $1.04 hit last week.

The dollar rose 0.1% against the yen to 156.55.

Oil prices rose along with other risk assets, although the higher dollar remains a burden as there are concerns over Chinese demand after weak retail sales data last week. [O/R]

Brent crude futures rose 0.2% to $73.07 a barrel, while US crude was up 0.3% at $69.62.

(Additional reporting by Wayne Cole in Sydney; Editing by Sam Holmes, Jamie Freed and Alexander Smith)