Stocks rise as traders shrug off inflation spike

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US and European stock markets rose Friday as traders shrugged off a spike in US inflation despite previous fears that rising prices could put an end to central bank stimulus measures.

Investors have been concerned that the global economic recovery would push prices up and prompt the US Federal Reserve and other central banks to raise interest rates and wind down bond-buying programmes.

Data released Thursday showed the US inflation rate at its highest level in 13 years, but the S&P 500 still finished the day’s trading at a record.

US markets opened higher on Friday while European shares were also up in afternoon trading. Hong Kong closed higher as well, but Tokyo ended the day flat and Shanghai was in the red.

“What the market seemed to sniff was peak inflation,” said analyst Patrick O’Hare, noting a drop on the yield on the 10-year US Treasury on Thursday and again early Friday.

Fawad Razaqzada, analyst at ThinkMarkets, said: “it appears as though the market is so confident that the Fed will maintain its current policy stance” despite the higher inflation.

European Central Bank chief Christine Lagarde on Thursday said it would be “too early and premature” to discuss tightening monetary policy, even as officials lifted their annual inflation outlook.

Still, analysts wonder how long the high readings will last and when the Fed will consider it time to act.

Fidelity International’s Salman Ahmed warned there were signs that high inflation could be more long-term.

“Both the magnitude of upside surprises and the duration of the current high inflation phase will matter when it comes to justifying” current policy of low interest rates and big stimulus, he said in a commentary.

Britain’s economic recovery is gathering pace, with GDP growing by 2.3 percent in April alone as the UK government eased its lockdown, official data showed Friday.

Oil prices also rose meanwhile as the International Energy Agency said crude demand was set to rise above pre-pandemic levels by the end of next year.

Elsewhere, traders are keeping an eye on Friday’s start to the G7 summit in Cornwall, southwest England.

On the summit’s eve, leaders from the Group of Seven wealthy nations pledged to donate a billion vaccines for the world’s poorest countries.

– Key figures at 1345 GMT –

New York – Dow: UP 0.2 percent at 34,533.96 points

London – FTSE 100: UP 0.6 percent at 7,130.84

Frankfurt – DAX 30: UP 0.7 percent at 15,687.12

Paris – CAC 40: UP 0.9 percent at 6,602.19

EURO STOXX 50: UP 0.7 percent at 4,125.68

Tokyo – Nikkei 225: FLAT at 28,948.73 (close)

Hong Kong – Hang Seng Index: UP 0.4 percent at 28,842.13 (close)

Shanghai – Composite: DOWN 0.6 percent at 3,589.75 (close)

Euro/dollar: DOWN at $1.2120 from $1.2176 at 2040 GMT

Pound/dollar: DOWN at $1.4124 from $1.4177

Euro/pound: DOWN at 85.82 pence from 85.87 pence

Dollar/yen: UP at 109.70 yen from 109.32 yen

Brent North Sea crude: UP 0.1 percent at $72.58 per barrel

West Texas Intermediate: UP 0.3 percent at $70.53 per barrel