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Stock markets rose for a second day Wednesday after slowing US inflation and retail sales raised hopes of a soft landing for the US economy.
European stocks gained further and Wall Street was higher midway through its session after some indices Tuesday had their best increases in six months, lifted by evidence the Federal Reserve may no longer need to pursue its monetary tightening.
Markets bounced after data showed consumer price inflation slowed sharper than expected to 3.2 percent in October.
A second gauge of inflation, the Producer Price Index, showed Wednesday that wholesale prices unexpectedly fell 0.5 percent in October, its steepest drop since April 2020.
A small 0.1 percent decline in US retail sales in October further helped underpin expectations of a soft landing.
"Better US PPI and retail sales figures have piled on the good news, helping equities around the globe to extend their gains," said Chris Beauchamp, chief market analyst at online trading platform IG.
"Investors continue to rejoice in the hope of no more Fed rate hikes. Overall the skies have cleared dramatically, and hopes of a soft landing and improved earnings have driven flows back into stocks."
US stocks were also boosted by better-than-expected results from bellwether retailer Target.
Several Fed officials have lined up in recent months to warn that while inflation has come down from the multi-decade peaks of last year, it remained too high to give up on their rate-hike campaign for fear of prices reflating.
Some analysts warned that markets may be getting ahead of themselves.
"The markets do appear a little overbought after a sharp three-week rally, especially the tech-heavy Nasdaq, so there is a risk of a short-term pullback," said Fawad Razaqzada, market analyst at StoneX.
"But with so many resistance levels having broken down, any potential short-term weakness should not be confused with a bearish reversal, unless the Fed starts to push back against rate cut expectations forcefully."
Jamie Dimon, the head of JPMorgan Chase, said that while Tuesday's figures were good, he thought inflation was a little more sticky than they showed.
"I still think you should prepare (for the fact the Fed) may need to do a little bit more," he told Bloomberg.
- Relieving the pressure -
London extended Tuesday's rally after data showed UK inflation slowed sharply in October. The CPI hit 4.6 percent, well down from 6.7 percent in September and also slightly better than expectations.
The pound weakened against the dollar, paring the gains enjoyed after the US inflation reading.
"UK inflation has slowed sharply, relieving the pressure on the Bank of England to hike rates again," said IG's Beauchamp.
"While bank stocks will have to get used to a world without a steady rise in interest income, the prospect of easing pressures on the UK economy continues to support bank stocks, which made further headway this afternoon."
The dollar clawed back some ground after slumping Tuesday, especially against the yen on news that Japan's economy shrank more than forecast in the third quarter.
The greenback has lost almost two cents against the euro this week, and has also dropped significantly against the South Korean won, Australian dollar and South African rand.
- Key figures around 1645 GMT -
New York - Dow: UP 0.2 percent at 34,914.44 points
London - FTSE 100: UP 0.6 percent at 7,486.91 (close)
Paris - CAC 40: UP 0.3 percent at 7,209.61 (close)
Frankfurt - DAX: UP 0.9 percent at 15,748.17 (close)
Tokyo - Nikkei 225: UP 2.5 percent at 33,519.70 (close)
Hong Kong - Hang Seng Index: UP 3.9 percent at 18,079.00 (close)
Shanghai - Composite: UP 0.6 percent at 3,072.83 (close)
Dollar/yen: UP at 151.04 from 150.37 yen on Tuesday
Pound/dollar: DOWN at $1.2430 from $1.2496
Euro/dollar: DOWN at $1.0854 from $1.0880
Euro/pound: UP at 87.29 pence from 87.05 pence
West Texas Intermediate: DOWN 1.69 percent at $76.94 per barrel
Brent North Sea crude: DOWN 1.2 percent at $81.47 per barrel
burs-gv/lth
M.Cunningham--TFWP