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Wall St climbs again on cooler inflation, positive earnings




July 14 (Reuters) – World stock markets extended their gains on Friday as the dollar hovered near a 15-month low after U.S. inflation data this week sparked a wave of investor optimism that the U.S. Federal Reserve was nearing the end of its rate hike cycle.

Data showed on Wednesday that US consumer prices grew at the slowest pace in more than two years, and on Thursday the smallest increase in US producer inflation in nearly three years. On Friday, the government reported that US import prices fell 0.2% last month, and US consumer sentiment jumped to the highest level in nearly two years.

As investors bet on a softer inflation outlook, the MSCI World Equity index (.MIWD00000PUS) rose to its highest so far this year. It was up 0.1% on the day on Friday, after a week of gains put it on track for its biggest weekly gain since November 2022 and the highest levels since early 2022.

Wall Street rose for a fifth straight day on Friday after some of the nation’s top lenders, including JPMorgan Chase ( JPM.N ) and insurer UnitedHealth Group ( UNH.N ), got off to a strong start to their second-quarter season.

The Dow Jones Industrial Average (.DJI) rose 0.45% to 34,549.15, the S&P 500 (.SPX) gained 0.10% to 4,514.5 and the Nasdaq Composite (.IXIC) added 0.12% to 14 155,78,78.

European stock indexes were little changed, with the STOXX (.STOXX) down 0.11% and London’s FTSE 100 down 0.08% (.FTSE). Germany’s DAX fell 0.2%, pulling back on recent gains (.GDAXI).

Michele Morganti, senior equity strategist at Generali Investments in Rome, urged caution.

He said price-to-earnings ratios were “exuberant” versus real interest rates and economic growth, particularly in the US

“We remain cautious on equities in the near term due to sticky core inflation, tightening credit conditions and macro indicators pointing south,” Morganti said in an email.

BOND YIELD

US Treasury yields bounced back slightly on Friday after sharp falls earlier in the week. The yield on 10-year government bonds was up 5.7 basis points to 3.817%.

The two-year US Treasury yield, which usually moves in line with interest rate expectations, was up 14 bps to 4.751%.

Eurozone government bond yields were little changed on Friday, with bonds holding on to gains after a sharp two-day rally sparked by soft US inflation numbers.

Money market traders still expect the Fed to raise interest rates by 25 bps on July 26, but they have reduced the chances of another one after that this year.

Norman Villamin, group strategist at UBP, said he expected another rate hike at the Fed in July, but that the September meeting was more uncertain.

“We are probably closer to the end of the cycle,” he said, although he added that above-target inflation was still expected to persist over the longer term.

“Getting 3% (inflation reading) is one thing, getting back to 2% is going to be a much more difficult task,” Villamin said. “It sets a floor for how low bond yields can go again.”

LOWER DOLLAR HOLDS

The dollar hovered near a 15-month low on Friday and was set for its biggest weekly decline since November after subdued US inflation data.

The euro was steady at $1.1232, after hitting a more than 16-month high earlier.

In oil markets, global benchmark Brent crude hovered around $80 a barrel on Friday, with bullish sentiment over US demand boosted by supply disruptions in Libya and Nigeria.

Brent was at $79.87, down 1.83% on the day; US oil fell 1.91% to $75.42 a barrel.

Gold fell on Friday, after rising in the previous five sessions, as growing expectations of a pause in US interest rate hikes set it on course for its biggest weekly gain since April. Spot gold % at $1,960.24 per ounce.

Reporting by Lawrence Delevingne in Boston and Elizabeth Howcroft in London; Editing by Jan Harvey, Nick Macfie and Alex Richardson

Our standards: Thomson Reuters Trust Principles.

Delevingne primarily works with business stories related to finance. He joined Reuters in 2015 and previously reported for CNBC.com and Absolute Return. Delevingne is a graduate of Columbia’s Graduate School of Journalism and Georgetown’s School of Foreign Service.

Reports on the intersection of finance and technology, including cryptocurrencies, NFTs, virtual worlds and the money that powers ‘Web3’.



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