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Global markets rallied on Thursday, continuing the momentum sparked by Wednesday’s encouraging U.S. inflation data and strong corporate earnings across multiple sectors.
Key Highlights
Earnings Boost Confidence
- Richemont (SIX:CFR): Shares of the luxury goods maker soared 17%, marking its best single-day performance in 17 years, following results that exceeded expectations. This uplifted the broader European luxury sector.
- Taiwan Semiconductor Manufacturing Co. (TSMC): The chipmaker posted record quarterly profits, fueling a 3.7% rise in its stock and strengthening sentiment for other semiconductor firms.
- U.S. Banks: Robust earnings from JPMorgan, BlackRock, and Goldman Sachs further supported risk appetite.
Market Performance
- Europe’s STOXX 600: Gained 0.65%, reaching its highest level in a month and nearing September’s record highs.
- Asia ex-Japan: Shares climbed 1.33%.
- Wall Street: Major indices posted their largest daily percentage gains since November 6.
Inflation Relief and Rate Expectations
- U.S. core inflation rose 3.2% in December, slightly below forecasts of 3.3%, while headline inflation matched expectations at 2.9%.
- Market participants now see a 50% chance of a second 25 basis point Federal Reserve rate cut this year, supported by moderate producer price data and a softer British inflation report.
Bond Market Reaction
- U.S. Treasuries: The benchmark 10-year yield dropped 13.5 basis points to 4.66%, the largest decline since mid-November.
- UK Gilts: The 10-year yield fell 15 basis points, marking its steepest drop since late 2023.
Currency Movements
- Japanese Yen: Strengthened to a near-month high against the dollar and euro, driven by speculation of a potential interest rate hike by the Bank of Japan.
- British Pound: Weakened by 0.3% against both the dollar and euro after disappointing UK GDP data showed only 0.1% growth in December.
Commodities
- Oil: Brent crude futures dipped 0.2% to $81.88 per barrel, influenced by the ceasefire agreement between Israel and Hamas.
- Gold: Spot gold hit a one-month high of $2,704.9 per ounce, bolstered by shifting interest rate expectations.
The combination of easing inflation, resilient corporate earnings, and potential central bank rate cuts has strengthened market sentiment. However, concerns remain over UK economic performance and geopolitical uncertainties, which could impact near-term market dynamics.
