Global markets surge after US inflation data signals early Fed hike exit

Fed Chair Jerome Powell Holds News Conference Following Federal Open Market Committee Meeting
Fed chair Jerome Powell has weighed down hopes of oil demand with his active approach to hiking interest rates in the US

Global markets received a huge boost today from another positive US inflation print.

London’s premier FTSE 100 index closed 0.76 per cent higher at 7,502.89 points, while its mid-cap domestically-focused counterpart, the FTSE 250 index, climbed 1.42 per cent to 19,086.29 points.

The pair had been fairly muted for most of the morning session. But, after new inflation numbers came out across the pond in early afternoon UK time, they surged.

Prices climbed 7.1 per cent over the year to November in the world’s largest economy, down from a rate of 7.7 per cent in October and much lower than Wall Street’s estimates.

The figures fuelled hopes that inflation has passed its peak and is now on a downward slope.

The prospect of inflation falling over the coming year raised expectations that the US Federal Reserve could end its tightening cycle sooner than expected.

Those hopes sent Wall Street flying. The tech-heavy Nasdaq, S&P 500 and Dow Jones indexes all shot higher during opening trading.

The Fed is anticipated to lift borrowing costs 50 basis points today, but could finish there.

“Looking further ahead a pause may not be far off. While another interest rate increase at the Fed’s next meeting in early February can’t be ruled out, our expectation is that there are unlikely to be any further increases beyond that,” Daniel McCormack, head of research at Macquarie Asset Management, said.

The pan-European Stoxx 600 index bumped more than one per cent higher.

The Wall Street Journal’s US dollar index fell more than one per cent on the prospect of fewer Fed hikes.