Wall Street edged higher on Wednesday, mirroring the performance of the FTSE 100 and European stocks, which rebounded from early losses as traders processed the latest US inflation figures. The November inflation data indicated a slight increase, aligning with economists’ predictions.
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The Consumer Price Index (CPI) rose to 2.7% in November, up from 2.6% in October. Month-over-month, headline CPI increased by 0.3% in November, compared to 0.2% in October. Core inflation, which excludes volatile food and energy prices, held steady at 3.3%, also meeting expectations. The monthly increase in core CPI remained at 0.3%, consistent with the previous month.
Markets Remain Confident in Fed Rate Cut
Despite the marginal uptick in inflation, money markets continue to anticipate a quarter-point interest rate reduction by the Federal Reserve next Wednesday. This would lower the benchmark rate from 4.5% to 4.25%.
Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, commented, “The data has given the Fed the ‘all clear’ for next week, and today’s inflation data keep a January cut in active discussion.”
Market expectations for a series of rate cuts by the Fed have been a primary driver of the S&P 500’s record-breaking performance this year, with the index reaching new all-time highs on 57 occasions.
Global Market Overview
European markets largely reversed earlier losses:
- London’s FTSE 100 index finished the session 0.3% higher, recovering from previous declines. However, mining stocks experienced a downturn, reflecting investor uncertainty.
- Germany’s DAX rose 0.1%, and France’s CAC 40 gained 0.2%.
- The pan-European STOXX 600 index saw a 0.1% increase, following a seven-week closing high on Monday.
Meanwhile, Wall Street’s upward trend coincided with Canada’s surprise interest rate cut amid concerns over potential trade tariffs imposed by the Trump administration. The pound sterling weakened against the US dollar, trading at 1.2740.
Conclusion: Cautious Optimism in the Markets
The slight increase in US inflation hasn’t significantly altered market expectations of a Fed rate cut next week. While investor sentiment remains generally positive, uncertainty persists, particularly surrounding trade tensions and geopolitical risks. The coming weeks will be crucial in determining the direction of both monetary policy and market performance. Global economic indicators, including inflation data and central bank decisions, will continue to shape investor behavior.
