(Corrected in 2nd paragraph – expectation of economists polled by Reuters was 5.2 percent, not 5.6 percent)
FRANKFURT (Reuters) – Europe’s investors are taking heart in the face of a significant drop in US inflation.
The leading German index, the Dax, jumped by 1.1 percent to 15,822 points on Wednesday afternoon after inflation data from the USA, marking its highest level in almost fifteen months. The EuroStoxx50 also gained momentum and rose by 0.9 percent to 4374 points. Futures for the major US indices also rose sharply.
US inflation for goods and services fell to 5.0 percent in March from 6.0 percent in February. Economists polled by Reuters had expected an average of 5.2 percent. After the successes in fighting inflation, investors were hoping that the US Federal Reserve could soon end its cycle of interest rate hikes.
DOLLARS ON DIVE STATION – FED PROTOCOLS IN SIGHTS
The lower interest rate expectations weighed on the US dollar. The dollar index, which measures the value of major currencies, fell 0.6 percent to 101.50 points. Investors, on the other hand, grabbed government bonds, which pushed the yield on the 10-year US Treasury to 3.366 percent from 3.447 percent previously. Gold rose 1 percent to $2,022 a troy ounce. On the crude oil market, Brent rose 0.8 percent to $86.30 a barrel.
Despite the progress made, the Fed’s target of an inflation rate of 2.0 percent is still a long way off. Core inflation remains uncomfortably high, said Helaba strategist Ulrich Wortberg. “This is likely to cause monetary policymakers a headache because it may require another rate hike.” The minutes of the last Fed interest rate meeting, which will be available in the evening, should provide an insight into the status of the discussions within the central bank. The majority of market participants are currently assuming a 25 basis point hike in the US key interest rate at the meeting in early May.
MERCK AFTER DAMPER AT MS-MITTEL ON SLOPE
Merck shares flew out of the depots, slipping 7.4 percent and marking their lowest level in almost six months. The Darmstadt-based pharmaceutical and technology group has to cope with a setback in the crucial clinical study with its multiple sclerosis drug evobrutinib.
Real estate values, on the other hand, were very popular with investors. Vonovia gained 3.7 percent in the Dax, while Aroundtown and TAG Immobilien were each more than six percent up on the small caps. Grand City Properties also rallied. According to dealers, a report by the Bloomberg agency helped, according to which the prices for new apartments in Berlin, which had been falling for a long time, rose by 0.8 percent in the last quarter.
A record profit at the Swedish truck manufacturer Volvo boosted the entire industry. Volvo shares rose 8.2 percent to 210.35 crowns. Rivals such as Traton and Daimler Truck attracted almost six and a good three percent respectively. Volvo defied delivery bottlenecks and inflation at the start of the year and exceeded market expectations with a record profit.
Scor’s ambitious business goals gave investors confidence. The papers of the French reinsurer rose by up to 4.1 percent to 23.04 euros.
(Report by Anika Ross, Zuzanna Szymanska. If you have any questions, please contact our editorial team at [email protected] (for politics and economics) or [email protected] (for companies and markets).)