The global economy has received the welcome news the rate of inflation in the US has again slowed and raised hopes major central banks could be nearing the end of drastically sharp increases in interest rates.
The downside surprise in US CPI will add to the argument inflation is cooling and provide justification for easier monetary policy.
The FTSE 100 jumped above 7,500 as US CPI in November came in at 7.1% versus expectations of 7.3%. US futures surged and European stocks also added to gains in a sharp risk-on rally. S&P 500 futures were 3.1% higher at the time of writing.
The Federal Reserve are meeting to decide on interest rates with a decision due tomorrow evening. This reading is unlikely to impact tomorrow’s announcement. However, the chair’s press conference will be closely watched for any hints of a change in the trajectory of rates in 2023.
The Bank of England and ECB will release their interest rate decisions on Thursday.
FTSE 100 consumer stocks
The FTSE 100 consumer constituents dominated the top gainers on Tuesday as investors hoped the dynamics of the US economy would soon be seen in the UK.
Although the US economy’s composition and factors influencing inflation are very different to the UK, any sign of slowing inflation and better conditions for consumers has been jumped on by traders.
Ocado was the FTSE 100’s top gainer, adding 10%, while JD Sports, Next and Kingfisher all posted respectable gains.
Wealth management stocks were higher on hopes savers would soon be able to despot more in their investment accounts. Hargreaves Lansdown shares gained 5.6% and St James’s Place added 4%.
The FTSE 100’s rally was broad with only 13 of the 100 constituents trading negatively at the time of writing.