EconomyA relief: the market is encouraged and rises 2%...

A relief: the market is encouraged and rises 2% due to lower inflation in the United States

Wall Street’s main indexes rose 2% on Wednesday, after data showed lower-than-expected US inflation in July, prompting traders to cut bets on a third straight 75 basis point rise in the stock. Federal Reserve rate in September.

The United States reported this Wednesday that inflation for July was 8.5% at the annual rate, a level lower than the 9.1% of the previous month, mainly due to the drop in gasoline prices. Additionally, consumer prices did not rise in July compared to June, marking the lowest monthly inflation in more than two years.

The market is now pricing in a 37.5% chance that federal funds rates will rise 75 basis points at the next US Federal Reserve meeting in September, up from 67.5% before the data.

By midday, the Dow Jones Industrial Average was up 1.48% at 33,257 points, while the S&P 500 was up 1.87% at 4,199 points. The Nasdaq gained 2.47% to 12,802 units.

In Mexico, the benchmark S&P/BMV IPC stock index rose 1.99% to 48,180.07 points, in line with the solid performance of markets abroad.

The titles of Grupo Financiero Banorte led the advance, with 5.89% more to 122.88 pesos, followed by those of the airline Volaris, which added 3.90% to 21.57 pesos.

“The signal of a slowing rate of inflation offers hope that the Fed’s rate hikes may not have to go as far as previously thought,” said Mike Owens, global sales trader at Saxo Markets.

After a rocky start to the year, the benchmark S&P 500 index is up almost 15% from its mid-June low, largely on expectations that the Federal Reserve will be less aggressive than anticipated in its efforts to achieve a landing. soft on the economy.

High-growth tech stocks, whose valuations are vulnerable to rising bond yields, rose as Treasury yields fell sharply across the board. Appl, Alphabet and Amazon advanced more than 2%.

“Rising real yields, due to the Fed’s commitment to fight inflation, have been a huge problem for valuations in 2022, so any inclination to ease monetary policy is seen as positive by the stock market. particularly for higher value companies,” said Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors.

the dollar sinks

The dollar fell more than 1% on Wednesday, following a cooler-than-expected inflation report for July in the United States. The dollar index, which measures the currency’s value against a basket of currency pairs, fell 1,128% to 105.15.

The Fed has indicated that it will take several monthly declines in CPI growth before it ceases the increasingly aggressive monetary policy tightening it has pursued to control inflation, which is currently at four-decade highs.

“They will be debating whether it’s a half point increase or 75 (bps), but I think the risk of much more aggressive tightening is now off the table,” said Edward Moya, senior market analyst at Oanda.

The peso benefits from the recent weakness of the dollar and appreciates 1.25% to 19.98 units per dollar. The euro was up 1.1% at $1.0325, the British pound was up 1.17% at $1.2216 and the greenback was also down 1.12% against the Swiss franc, which was trading at 0.9428 to the dollar.

With information from Reuters.

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