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Wall Street’s leading indexes, the S&P 500 and Nasdaq Composite, reached new highs on Wednesday following an encouraging report on U.S. inflation. Cac 40, on the other hand, couldn’t join in the excitement and narrowly missed out on matching the record.
US inflation reassures Wall Street
US inflation data for April pleasantly surprised investors. The rate of increase in consumer prices was only 0.3%, one-tenth of a percentage point lower than expected, but the year-on-year increase was 3.4%, in line with expectations. Excluding food and energy, prices rose 3.6% annually, the lowest level since April 2021.
This lull in inflation was welcomed by US markets. The S&P 500 and Nasdaq Composite rose 0.4% to 0.6%, hitting new highs. Meanwhile, bond yields fell, indicating a return to optimism.
But experts say it will take more than a month of profits to convince the Federal Reserve to ease monetary policy. There remains a concern that service inflation, excluding housing, will accelerate again, and there is a possibility that the Fed will maintain high interest rates until September.
Mixed signals on consumption
In addition to inflation, retail sales in April fell short of analysts’ expectations of a 0.4% increase. Excluding automobiles, gasoline, building materials and food services, prices fell 0.3%.
Nevertheless, economists are downplaying the downturn, attributing it to the compensatory effect of months of strong consumption. Despite pressure from high interest rates, the bank maintained its outlook for steady growth in household spending in the second quarter.
Recovery in Europe, CAC40 lagging behind
In Europe, the European Commission has revised down its 2024 inflation forecast, now predicting it to be 2.5% from 2.7%. It has been confirmed that this year’s GDP growth rate will be 0.8% and next year’s 1.4%.
On the corporate side, CGG soared 20% after strong quarterly results, while Trigano fell 9% despite higher profits due to disappointing cash generation.
Despite Wall Street’s excitement, CAC 40 failed to break its own record this Wednesday. Slowing U.S. inflation is a good sign, but caution is still needed given the conflicting signals from the economy. Investors will be keeping an eye on upcoming indicators to gauge the market’s trajectory in the coming months.
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Disclaimer
The views, ideas and opinions expressed in this article are solely those of the author and should not be construed as investment advice. Please do your own research before making any investment decisions.
