Wall Street stocks rose on Wednesday as inflation across America slowed in May. On an annual basis, US CPI inflation slowed to 3.3%, down from 3.4% in the year to April.
Consumer prices were flat, month-on-month, having risen by 0.3% during April. Cheaper gasoline at the pumps helped to ease the cost of living squeeze, while housing costs continued to rise.
The FTSE 100 (^FTSE) and European stocks were also higher on the day despite wet weather affecting UK economic growth in April.
According to the Office for National Statistics (ONS), persistent rain kept consumers from spending and caused growth to flatline during the month. Rainfall in April was 55% higher than average and the wettest April since 2012, with sectors such as retail, construction and pubs all severely impacted.
Gross domestic product (GDP) was forecasted to have grown by 0.6%, following growth of 0.4% in March. It comes as a blow to prime minister Rishi Sunak, who previously claimed that the British economy had turned a corner.
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London’s benchmark index was 0.8% higher in afternoon trade.
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Germany’s DAX (^GDAXI) rose 1.4% and the CAC (^FCHI) in Paris headed 1% into the green.
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The pan-European STOXX 600 (^STOXX) was up 1.1%.
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Wall Street opened higher amid boosted hopes for interest rate cuts later this year. Markets now fully price a November rate cut.
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The pound surged against the US dollar (GBPUSD=X), up 0.7% at 1.2840.
Read more: Trending tickers: Oracle, Apple, Paramount and L&G
Kyle Chapman, FX markets analyst at Ballinger Group comments: “The Fed will breathe a heavy sigh of relief that we are finally beginning to see some progress on the disinflationary trajectory this year.
“The good news is that it is broad-based, and there is good progress on some of the components that were stickier last time around. Shelter inflation refuses to budge, but when the decline in the leading indicators finally filters through, rate cuts should come into clear view.”
Follow along for live updates throughout the day:
LIVE COVERAGE IS OVER27 updates
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Labour government could be good for stock market
Labour Party leader Sir Keir Starmer during a visit to Whale Hill Primary School in Eston, Middlesbrough where he announced Labour’s plans to ‘tackle the crisis in children’s dentistry’ and clear the backlog with 100,000 extra appointments for children. The Labour leader was campaigning in the north east of England with shadow health secretary, Wes Streeting for next month’s General Election on July 4. Picture date: Tuesday June 11, 2024. (Stefan Rousseau, PA Images) A labour government could be good for the FTSE 100, the managing director at eToro UK said.
Dan Moczulski, managing director at eToro UK, said:
The FTSE seems very comfortable with Labour. We’re seeing a clear parallel to 1997, a moderate Labour party unseating a long-standing and divided Conservative government.
A change of government after years of Tory rule was a stimulant for the UK stock market in 1997 and it looks like it will be again this year.
It comes as the stock market rallied 17% ahead of the 1997 general election, and after Tony Blair had been elected by a landslide it rose 35% in the following year.
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How to invest in the Indian stock market
The volatility India’s stock market saw this past week showed just how notoriously bad financial markets are at assessing and pricing political risk accurately. But as shares in Mumbai and Delhi bounce back, is it time for you to invest in the world’s fifth-largest economy?
You wouldn’t be alone. Last year alone, overseas investors bought $21.7bn worth of Indian stocks, accounting for 55% of foreign purchases of equities in Asia, excluding Japan, according to data from HSBC (HSBA.L).
The benchmark BSE Sensex Index (^BSESN) is up 4% so far this year and the Nifty 50 (^NSEI) has pushed 13% higher in the past six months.
India is already the world’s most expensive major equity market, with a forward price-to-earnings ratio that is even higher than the technology-heavy US market.
“At the simplest level, India is both a low-cost manufacturing location and a rapidly developing source of demand. Perhaps, more significantly, India is also home to true centres of innovation in a number of fields,” said analysts at investment bank Bernstein.
However, with the result of India’s extended election triggering significant market volatility, whether its stock market will continue to outperform is a question on investors’ minds.
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Paramount shares crash after failed merger talks with Skydance
Shares in Paramount (PARA) have crashed and continue to dive deeper into the red during pre-market hours after the c behind Paramount Pictures pulled the plug on a proposed multibillion-dollar merger, after months of negotiations.
Shari Redstone ended talks with Skydance Media over a merger that would have handed control of Paramount from her family to billionaire David Ellison.
Skydance had offered about $2bn to acquire Redstone’s National Amusements (NAI) after which he would merge Paramount into Ellison’s company through a stock deal.
Skydance was also ready to buy out about half of Paramount’s common shareholders at $15 a share and inject about $1.5bn to help pay off the company’s debt.
A statement from National Amusements merely noted that the two sides “have not been able to reach mutually acceptable terms” for the deal.
Paramount has struggled in an evolving media landscape, particularly as its traditional cable business has declined.
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Gold rush grips Asia
nuggets and gold bullion in studio on white background (Gilles Paire, Panther Media GmbH) Demand for gold in Asia surged on Wednesday despite prices hovering near the record highs. It comes as buyers are snapping up the metal to hedge against geopolitical and economic uncertainty.
Spot gold is trading a little over $2,300 per ounce, up about 12% year-to-date and only about 6% shy of the record high it hit in May.
Lower confidence in other investment options, such as real estate and equities, is also a factor behind the demand for gold, according to analysts.
“When the macro-economic backdrop returns to normal, when real estate and equities are more interesting, I think that price sensitivity will return,” Ruth Crowell, chief executive of the London Bullion Market Association, told Reuters.
In Japan, there are more gold bulls than bears despite record high prices, according to Bruce Ikemizu, chief director of the Japan Bullion Market Association.
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How to get the best holiday exchange rates
This week the value of the pound hit 1.18 euros (GBPEUR=X) — its highest point since August 2022. For anyone planning a holiday to the Eurozone, it has raised the question of whether now is a good time to get your holiday money.
The pound’s gains against the euro came as the European Central Bank cut interest rates. Lower rates in the eurozone make rates in the UK look comparatively attractive to investors, so money has flowed from the eurozone to the UK, pushing the pound up against the euro.
With the ECB cut largely already reflected in the current exchange rate, if you’re travelling to the eurozone this summer, it might persuade you to exchange at least some of your cash while the pound is riding high.
Of course, there are no guarantees it won’t rise even higher by the time you travel. Forecasting exchange rate movements is notoriously difficult, and they’re affected by all sorts of unpredictable factors, so the pound could rise again. It means you might not want to take a punt on this being the peak, and exchanging all the cash you need on your break.
One possible option is to exchange some of it now, and the rest of it closer to the day you travel, to hedge your bets against a fall in the pound between now and then.
However, it’s important to bear in mind that the best exchange rates for holiday money are available for those who spend on debit and credit cards while they’re away (as long as they’re the ones without additional charges for overseas use).
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President Macron set to speak today
Ouradour-Sur-Glane, France. 10 June, 2024. French President Emmanuel Macron visiting the ruins of the village of Oradour-sur-Glane, southwestern France, on June 10 2024. This year marks the 80th anniversary of the Oradour-sur-Glane massacre. On June 10, 1944, just four days after the Allied forces landed on the Normandy coast on D-Day, 643 inhabitants, including 247 children, were massacred in the tranquil village of Oradour-sur-Glane in southwestern France, by German Waffen-SS soldiers belonging to the 2nd SS Panzer Division (ABACAPRESS, Abaca Press) French president Emmanuel Macron is set to speak at a press conference later today, however there have been growing questions about the political landscape his centrist alliance will be facing at the elections.
On the left, an alliance was formed on Monday night between the Greens, Socialists, Communists and La France Insoumise. But on the right there is still uncertainty, as Éric Ciotti, who leads Les Républicains party, called for an alliance with Marine Le Pen’s Rassemblement National.
Jim Reid at Deutsche Bank said:
Other figures in the party sternly rejected those suggestions, but the historic divisions between the traditional right-wing parties and the RN are becoming increasingly blurred as the latter has come to dominate the right-wing of the political spectrum in France.
Later in the day, we heard that talks on forming an alliance between RN and the smaller far-right Reconquest party had broken down.
In terms of the latest polls, an Ifop survey out yesterday had Marine Le Pen’s party on 35%, an alliance of four left-wing parties on 25%, and Macron’s alliance on 18%.
Watch: How does inflation affect interest rates?
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