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Global Stocks Gain Ahead of U.S. Inflation Numbers

14 Feb 2018 9:55 am
By David Hodari and Kenan Machado 
   -- Global equities maintain gentle rally 
   -- Attention fixed on U.S. inflation data 
   -- European banks open strong 

Global stocks climbed Wednesday, with the release of U.S. economic data in sharp focus after last week's acute market selloffs.

The Stoxx Europe 600 gained 0.8% in morning trade, lifted by a 0.9% increase in the financial sector. Credit Suisse shares rose 3.4% after the bank released better-than-expected fourth-quarter results.

The upswing in Europe echoed trading in Asian indexes. S&P 500 futures were also up 0.4% after U.S. benchmarks ticked up for a third straight day Tuesday.

The optimistic mood came ahead of the release of fresh data on U.S. inflation. "People will be very, very focused on consumer-price index numbers," said Ben Laidler, HSBC's global equity strategist and Americas research head.

Investors "will focus on core inflation, with consensus forecasting 1.7%. If we get that [figure] the market might take relief from it, but if it's higher, then the pressure will be back on," Mr. Laidler said.

A lack of inflationary worries in 2017 allowed U.S. equities indexes to soar to multiple record highs early this year, while investors kept long-term bond yields contained. Recent whipsaw volatility, though, apparently came in the wake of a rise in U.S. wage growth.

Economists polled by The Wall Street Journal expect headline inflation at 1.9% and core inflation, excluding food and energy, at 1.7%.

Should CPI data beat expectations, it would likely stoke market fears "about the potential for faster inflation... [which] might necessitate a fourth Fed [interest rate] hike in 2018," Société Générale analysts said in a note.

U.S. 10-year Treasury yields were recently around 2.829%, versus 2.837% late Tuesday. Yields move inversely to prices.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was last down 0.1% at its lowest since Feb. 2.

South Korea's Kospi gained 1.1%, helped by a 3.1% jump in Samsung Electronics. The index heavyweight extended its gains to 9.6% so far this week, clawing back most of its February losses.

Japan's Nikkei fell 0.4%, weakening on a rallying yen after starting the day higher. The Japanese currency rose to a 15-month high against the dollar before slightly softening, with the U.S. dollar last down 0.3% at Yen107.4920.

The yen, often seen as a haven currency, has been the best performing G-10 currency so far in 2018 in a trend consistent with last week's U.S. equity market plunge, said Lee Hardman, currency analyst at MUFG in a note.

Chinese equities reversed early declines, with both Shanghai and Shenzhen composite indexes up 0.5%. Markets in China and South Korea will be closed for the rest of the week as those countries celebrate the Lunar New Year holiday.

The Hang Seng rose 2.3%, buoyed by Tencent Holdings's 6.4% rally so far this week.

Australasian indexes slipped on local factors, with Commonwealth Bank helping drag down Australia's main benchmark by 0.3%. New Zealand stocks fell 1.3% after shares in building-materials firm Fletcher Building slumped on weak results.

Richard Barley contributed to this article.

Write to David Hodari at David.Hodari@dowjones.com and Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

February 14, 2018 04:55 ET (09:55 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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