World stock markets are rising, government interest rates are falling on inflation data

NEW YORK, May 27 (Reuters) – Global markets held a broad-based rally on Friday, while yields on the US government bond benchmark fell after data showed US spending rose in April and the rise in inflation slowed, two signs of the world’s largest The economy may be growing this quarter.

Consumption spending, which accounts for more than two-thirds of US economic activity, increased by 0.9% last month, and although inflation continued to rise in April, it was lower than in recent months. The price index for personal consumption (PCE) rose 0.2%, the smallest increase since November 2020. read more

Wall Street rose on Friday after the data, with all three major US stock indices bringing a decisive end to their longest weekly losing streak in decades. read more

The US Federal Reserve called inflation a serious concern in minutes from the May meeting, which was announced earlier this week. A majority of central bank governors supported two interest rate hikes of half a percentage point in June and July, as the group tried to curb inflation without causing a recession.

The Fed allowed for a break in the upswings if the economy weakened. read more

Analysts said the data on consumption and inflation were encouraging and supported second-quarter growth estimates, which are generally above 2.0 on an annual basis.

“The growth engine of the US economy is still alive and it’s important,” said Joe Quinlan, head of CIO Market Strategy for Merrill and Bank of America Private Bank. “Growth forecasts for (2nd quarter) are still good. There is a better tone in the market than we have seen in recent weeks, considering that inflation may peak here. Maybe we can avoid stagflation.”

MSCI’s world stock index (.MIWD00000PUS), which tracks stocks in 45 nations, was up 2.12% at. 16:45 EDT (2045 GMT).

Global equity funds saw inflows in the week to May 25 for the first week in seven weeks, according to Refinitiv Lipper. read more

European equities (.STOXX) reached a three-week high and rose 1.42%. The UK’s FTSE (.FTSE) also reached a three-week high, heading for its best weekly viewing since mid-March.

The Dow Jones Industrial Average (.DJI) rose 575.77 points, or 1.76%, to 33,212.96, the S&P 500 (.SPX) rose 100.4 points, or 2.47%, to 4,158.24 and Nasdaq Composite <390IC> add to <. or 3.33%, to 12,131.13.

The yield on the benchmark index for 10-year government bonds was last 2.7432%. It had reached a three-year high of 3.2030% earlier this month due to fears that the Fed may have to raise interest rates quickly to gain control of inflation.

Lower interest rates show that the Fed’s monetary policy succeeds in tightening credit and slowing down prices, said BofA’s Quinlan.

“The 10-year return suggests that we do not need to have inflation breaks above 9-10%,” Quinlan said. “We are approaching a peak in inflation.”

The two-year interest rate, which rises with traders’ expectations of higher-fed fund interest rates, fell to 2.4839%.

German 10-year bond yields fell 4 bps to 0.955%.

Asian stocks (.MIAPJ0000PUS) also benefited from hopes of stabilizing China-US ties and more stimulus from Chinese authorities. read more

The United States did not want to block China from expanding its economy, but wanted the country to follow international rules, Foreign Minister Antony Blinken said on Thursday in comments that some investors interpreted as positive for bilateral ties. read more

Emerging markets rose 1.98 percent. MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) closed 2.17% higher, while Japanese Nikkei (.N225) rose 0.66%.

The swing towards a largely positive market sentiment drove the dollar to a month’s lowest level against an index of currencies.

The dollar index fell 0.059%, with the euro up 0.06% to 1.073 dollars.

Oil prices were close to two months high on the prospect of a tight market due to increasing petrol consumption in the US in the summer, and also the possibility of an EU ban on Russian oil.

U.S. crude fell 98 cents higher, or 0.86 percent, to $ 115.07 a barrel. Brent settled $ 2.03 higher, or up 1.73%, to $ 119.43 per barrel.

Spot gold increased by 0.2% to $ 1,852.83 per ounce.

Reporting by Elizabeth Dilts Marshall in New York Further reporting by Chuck Mikolajczak in New York, Carolyn Cohn in London, Stella Qiu in Beijing and Kevin Buckland in Tokyo; Edited by Chizu Nomiyama, Alistair Bell and Matthew Lewis

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