Wall Street yelled ‘the inflation wars are over’ and sent share prices surging after US consumer price inflation slowed a little in July.
The Consumer Price Index rose by 8.5% year-on-year in July, slower than June’s 40 year high of 9.1%.
For that thank the forecast impact of falling petrol prices which were predicted to cut the CPI by around 0.5%.
Month on month the CPI was flat in July compared with June, another point grabbed by the bulls on Wednesday.
The Dow jumped 535.10 points, or 1.63%, to close at 33,309.51.
The S&P 500 ended at its highest close since May , finishing up 2.13% to 4,210.24 and the Nasdaq surged 2.89% to 12,854.80 for its best close since late April.
The news and Wall Street’s surge saw the overnight ASX 200 futures market rise 71 points, meaning it should be a strong start here today.
The news also saw the US dollar fall with the Aussie currency leaping past 70 US cents and eying 71 US cents in a matter of hours.
US bond yields fell – the 10-year security seeing its yield dip back under 2.80%.
US oil prices edged up to just over $US91 a barrel, gold eased to around $US1,807 an ounce while silver and copper rose.
The S&P 500 is now up about 15% from its mid-June lows, though still down 12% year-to-date.
Ten-year Treasury yields, have fallen about 70 basis points from their June peak.
The fall in yields also saw futures markets pare their bets on the size of the next Fed rise in late September – a rise of 0.50% or even 0.25% is preferred to the previously expected 0.75%.
With no Fed meeting this month, we will get six weeks of Yak Yak from markets and others about what the fed will do and it will all be driven by the data – the August inflation and the August jobs data especially.
Wall Street’s sharp rise was nothing but a relief rally cheering that the CPI reading didn’t show another rise. Two months ago 8% plus inflation was smashing Wall Street and that hasn’t gone away.
