Home ›› 11 Feb 2022 ›› Stock
Stock markets rose and the dollar traded mixed Thursday before the release of US inflation data set to have a major bearing on the Federal Reserve’s plans for interest rate hikes.
A broadly positive week for global equities continued thanks to some healthy earnings results, further reopening of economies and signs of easing Russia-Ukraine tensions, analysts said.
On the downside, the eurozone economy will grow less than expected this year, the European Commission said Thursday, as energy prices and supply chain problems jack up inflation and delay a more sustained recovery from the pandemic.
“Inflation and central banks’ response to it remain front and centre in investors’ minds,” noted Craig Erlam, senior market analyst at Oanda trading group. “Earnings season came at just the right time and while there have been bumps in the road, investors will reflect on it positively and it’s certainly helped to lift the mood.”
Commentators warn that a US inflation reading Thursday above the forecast 7.2 per cent -- which would be a new four-decade high -- would pressure the Fed to act more aggressively to rein in prices.
Some Fed officials on Wednesday said policymakers would make their decisions based on data coming across their desks, with a 50-basis-point hike -- as opposed to the usual 25 basis points -- not off the table.
Surging inflation and bets that the US central bank will end its pandemic-era cheap cash policies have weighed on world markets in recent months, stalling a two-year rally that saw them hit record or multi-year highs.
Earnings boost
There is a feeling in some quarters that investors may be getting used to the prospect of higher borrowing costs, while still-strong economic data and the easing of containment measures will continue to support company earnings.
“While uncertainty remains as to the course of inflation, particularly wages, and interest rates in the months ahead given the planned tightening by the Fed is essentially new ground... historically economies have grown in much higher interest rate environments,” said markets strategist Louis Navellier.
“Why is the market rallying when we’re about to get hit with that horrible inflation news? In a word: earnings. They’re much better than anyone anticipated. So the surprises are huge and the guidance, by and large, is great.”
French energy giant TotalEnergies rebounded from the Covid crisis with a huge 2021 profit as oil and gas prices soared.
The company reported net profit of $16 billion following a $7.2-billion loss in 2020, when crude prices crashed.
Elsewhere, signs of progress on the diplomatic front in eastern Europe have kept a cap on oil price gains in recent days, as has the possibility of a revived Iran nuclear deal, which could see Tehran resume worldwide exports and ease supply problems.
