World shares increased on Monday as investors were encouraged by reports showing a decrease in inflation. This development may lead the Federal Reserve to reconsider its plans for raising interest rates. U.S. futures were mixed, and oil prices saw a slight increase.
In European markets, Germany’s DAX rose by 0.3%, while the CAC 40 in Paris and Britain’s FTSE 100 both experienced smaller gains. In the U.S., the Dow Jones Industrial Average futures were down by 0.1%, while the S&P 500 futures were up by 0.1%. On Friday, the S&P 500 reached its highest level since April 2022, climbing 1.2% to 4,450.38. The Dow Jones Industrial Average rose by 0.8%, and the Nasdaq composite jumped 1.4%.
U.S. trading is closed for half a day on Monday and will be closed all day on Tuesday for the Independence Day holiday.
Investors are hopeful that inflation will ease enough for the Federal Reserve to stop raising interest rates soon. This would reduce pressure on the U.S. economy and global financial markets.
A report released on Friday showed a decrease in the preferred inflation measure used by the Fed in May. The report also indicated that consumer spending growth slowed more than expected. If there are fewer dollars being spent, this could alleviate further pressure on inflation.
In Europe, inflation also decreased in June, with the annual rate reaching 5.5%, down from 6.1% in May in the 20 countries that use the euro currency, according to Eurostat.
However, this decrease is not significant enough to provide relief for consumers experiencing high prices, nor does it prevent further interest rate hikes that would raise borrowing costs across the economy.
Central banks in Asia have also begun keeping interest rates steady or lowering them to combat slowing economic activity. Vietnam and China have been cutting rates, and other countries are witnessing a cooling of manufacturing activity due to weakening export demand.
In Asian trading, Japan’s Nikkei 225 rose by 1.7%, Australia’s S&P/ASX 200 increased by 0.6%, South Korea’s Kospi jumped by 1.5%, Hong Kong’s Hang Seng surged by 2.1%, and the Shanghai Composite gained 1.3%.
The Bank of Japan’s quarterly “tankan report” showed an improvement in business sentiment for the fifth consecutive quarter, with the main indicator number rising by 3 points to plus 23.
Since last year, the Federal Reserve has already raised rates by 5 percentage points from nearly zero. Traders on Wall Street have reduced their expectations for further interest rate hikes this year. According to data from CME Group, the majority of traders predict that the federal funds rate will only be 0.25 percentage points higher by the end of 2023, if at all.
After the release of the economic data, yields in the bond market dropped. The 10-year Treasury yield fell to 3.82% from nearly 3.87% before the report’s release. This has an impact on rates for mortgages and other loans.
The S&P 500 had a successful June, experiencing its sixth winning week in the last seven and its best month since October. The index has gained almost 16% in the first half of the year, outperforming 16 out of the past 23 full years.
In energy trading, U.S. crude oil rose by 57 cents to $71.21 a barrel, and Brent crude, the international standard, increased by 59 cents to $76.00 a barrel.
In currency trading, the U.S. dollar strengthened against the Japanese yen, rising to 144.73 yen from 144.30 yen. The euro weakened to $1.0890 from $1.0924.