European Markets Rise; US CPI Eases Fears of Fed Rate Hike
European stock markets traded higher on Thursday (August 3) after US inflation data—which met expectations—bolstered hopes that the Federal Reserve would hold interest rates steady at its September meeting.
The Stoxx Europe 600 index rose approximately 0.2%, edging back toward all-time highs. Germany's DAX and France's CAC 40 each gained around 0.3%, while the UK's FTSE 100 rose more strongly by about 0.6%, supported by positive domestic economic growth data.
Market sentiment improved after the US Consumer Price Index (CPI) rose 0.1% month-on-month in July, while Core CPI stood at 2.5% year-on-year. The data showed no new surge in inflation, helping to alleviate concerns regarding imminent monetary tightening by the Fed.
Optimism was further reinforced by US labor market data that had previously indicated signs of cooling. The combination of a slowing labor market and relatively contained inflation led market participants to lower their expectations for a 25-basis-point rate hike in September.
Money markets now estimate the probability of a Fed rate hike in September at around 40%, down sharply from nearly 67% a week earlier. This reduction in interest rate risk has given investors more room to return to risk assets, including European equities.
Newsmaker Analysis: Inflation data meeting expectations has boosted sentiment in European markets, as pressure on the Fed to raise rates again begins to subside. Provided that upcoming economic data does not reveal a new spike in inflation, major European indices have the potential to maintain their momentum near record highs. (asd)
Source: Newsmaker.id
