European stock markets were happy yesterday to carry the week’s record-breaking gains into the weekend, while Wall Street’s worries about retail weakness were compounded by soft core inflation data.
Department store chain JC Penney reported disappointing sales yesterday, adding to concerns over retail sector businesses sparked by giant Macy’s figures the previous day.
US inflation data for April, while showing a higher headline figure, contained weaker-than-expected core inflation, making the Federal Reserve’s job of pinpointing the right time for its next rate hike more complicated, dealers said.
The dollar weakened in response, and so did the New York stock market as earlier optimism about solid jobs data faded.
T-bond prices rose as investors became less sure about an early rate hike.
“Treasury yields and the US dollar are lower, as the data included a cooler-than-expected read on consumer price inflation,” said analysts at Charles Schwab.
European equity markets, meanwhile, were modestly optimistic following strong German growth data as they awaited political developments in coming days.
Emmanuel Macron will be sworn in as French president on Sunday and is expected to line up a government the following day, giving a first indication of the outlook for his economic reform plans.
He has already presented hundreds of candidates for next month’s parliamentary election, many of whom are inexperienced in politics, but that could actually be an asset, said Jasper Lawler at London Capital Group.
“Many of Macron’s candidates have never held office and this may improve the chance of election with France’s disgruntled voters — and the likelihood of economic reform once in office,” he said.
Germany’s most populous state North Rhine-Westphalia votes in a regional election Sunday, a key test for Angela Merkel’s re-election chances as chancellor.
London’s benchmark FTSE 100 index, meanwhile, reached a new record closing high as sterling weakness boosted the earnings outlook for big British exporters. Frankfurt also ended at a new closing high.
Earlier in Asia, traders took a step back ahead of the weekend with confidence rattled by a series of below-par Chinese data and the lingering fallout of Donald Trump’s shock firing of the head of the FBI, which some fear could lead to a crisis that will knock the president’s economy-boosting agenda off centre.
Tokyo’s Nikkei index closed down 0.4% from a 17-month high, but Hong Kong rose 0.1% extending a rally to five days.
Bloomberg News reported, without naming sources, that China had made preparations to support the Hang Seng Index if needed ahead of the expected visit of President Xi Xinping to the city for the July 1 handover celebrations.
Shanghai — which has fallen about 7% in the past month on worries about a state crackdown on leveraged investing — ended up 0.7% with speculation mainland shares were also being given state backing.
The dollar declined against the yen and euro, having enjoyed a surge on Thursday on comments from a top Federal Reserve official backing three more interest rate hikes this year.
In London, the FTSE 100 closed up 0.7% to 7,435.39 points; Frankfurt — DAX 30 rose 0.5% to 12,770.41 points and Paris — CAC 40 ended up 0.4% to 5,405.42 points at the close yesterday.
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