Global stock markets rally, Treasury yields fall on inflation data

  • US consumer spending rises, rising inflation slows
  • Wall Street rallies and ends a weekly losing streak
  • Treasury yields fall
  • Brent oil rises $2

NEW YORK, May 27 (Reuters) – Global markets enjoyed a broad-based rally on Friday as the yield on benchmark U.S. Treasuries fell after data showed U.S. consumer spending rose in April and that the rise in inflation has slowed, two of the most important signs in the world. the economy could be on track to grow this quarter.

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

Wall Street rebounded from the data on Friday, with the three major U.S. stock indexes decisively ending their longest weekly losing streaks in decades. Read more

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The US Federal Reserve, in the minutes of its May meeting released earlier this week, called inflation a serious concern. The majority of central bankers backed two half-percentage-point rate hikes in June and July as the group tries to rein in inflation without triggering a recession.

The Fed gave way to a pause in the hikes if the economy weakens. Read more

Analysts said consumer spending and inflation data were encouraging and supported second-quarter growth estimates, which are mostly above a 2.0 annualized rate.

“The growth engine of the US economy is still running and that’s important,” said Joe Quinlan, chief market strategy CIO for Merrill and Bank of America Private Bank. “Growth estimates for (the second quarter) are still good. There is a better tone in the market than what we have seen in recent weeks, in terms of inflation which could peak here. Maybe we can avoid stagflation.”

The MSCI World Stock Index (.MIWD00000PUS), which tracks stocks from 45 countries, rose 2.12% at 4:45 p.m. 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 stocks (.STOXX) hit a three-week high and rose 1.42%. Britain’s FTSE (.FTSE) also hit a three-week high and was heading for its best weekly performance 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) gained 100.4 points, or 2.47%, to 4,158.24 and the Nasdaq Composite <.ixic> added 390.48 points, or 3.33%, to 12,131.13.

The yield on the benchmark 10-year Treasury bills was last seen at 2.7432%. It had hit a three-year high of 3.2030% earlier this month on fears the Fed would have to raise rates quickly to bring inflation under control.

Lower yields show the Fed’s monetary policy is succeeding in tightening credit and slowing prices, BofA’s Quinlan said.

“The 10-year yield suggests we don’t need a break in inflation above 9-10%,” Quinlan said. “We are approaching a peak in inflation.”

The two-year yield, which rises on traders’ expectations of a hike in the fed funds rate, fell to 2.4839%.

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

Asian stocks (.MIAPJ0000PUS) also benefited from hopes of stabilizing US-China relations and more stimulus from the Chinese government. Read more

The United States would not prevent China from developing its economy, but wanted it to adhere to international rules, Secretary of State Antony Blinken said Thursday in remarks that some investors interpreted as positive for bilateral relations. Read more

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

The shift to broadly positive market sentiment drove the dollar to a one-month low against a currency index.

The dollar index fell 0.059%, with the euro up 0.06% at $1.073.

Oil prices hit near two-month highs ahead of a tight market due to higher US gas consumption in the summer, as well as the possibility of an oil ban. EU on Russian oil.

U.S. crude stood 98 cents higher, up 0.86%, at $115.07 a barrel. Brent rose $2.03, or 1.73%, to $119.43 a barrel.

Spot gold added 0.2% to $1,852.83 an ounce.

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

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