Falling Inflation Gives Equities A Boost

Data showing lower inflation in the United States and Europe lifted stocks Thursday, with the dollar advancing as traders bet on faster ECB interest rate cuts following the surprisingly big drop in European prices.

A key pricing measure used by the US Federal Reserve to set interest rates eased further last month amid a drop in energy prices, according to government data published on Thursday.

The annual personal consumption expenditures (PCE) price index rose 3.0 percent in October, down 0.4 percentage points from a month earlier, the US Commerce Department said.

Meanwhile, consumer prices in the 20-nation eurozone rose a lower-than-expected 2.4 percent in November from a year earlier, the EU's official statistics agency said, the smallest annual gain since July 2021.

The data will provide comfort to the European Central Bank, which has paused its unprecedented streak of interest rate hikes, although it has remained cautious about declaring victory over once red-hot inflation.

After an up day in Europe, Wall Street stocks had a mixed day, with the Nasdaq edging lower and the Dow and S&P 500 both rising to conclude a buoyant November.

The dollar, meanwhile, charged higher against other currencies, including the euro.

Analysts are now betting on when the ECB will begin to cut rates.

"The larger-than-expected fall in inflation in November means it is becoming increasingly untenable for policymakers to claim that they are not even thinking about rate cuts," said Andrew Kenningham, chief Europe economist at Capital Economics.

"We are now penciling in a first cut for next June, rather than September," he added.

Pantheon Macroeconomics predicted the ECB would start rate cuts in March.

"We can't be sure this picture will survive the next few months, especially not if gas prices snap back in response to a sustained cold spell," Pantheon said.

"But, for now, this is driving a dramatic downturn in our forecasts for headline inflation."

Elsewhere, oil prices slumped lower even after OPEC and its Russia-led allies announced they would further slash production next year in an effort to prop up volatile prices.

Analysts said the market had expected more from the 13-member Organization of the Petroleum Exporting Countries (OPEC) and its 10 partners.

The drop in prices reflects recognition that "the group failed to agree to a strategy unanimously and had to rely on voluntary unilateral cuts instead," said a note from Rystad Energy senior vice president Jorge Leon.

New York - Dow: UP 1.5 percent at 35,950.89 (close)

New York - S&P 500: UP 0.4 percent at 4,567.80 (close)

New York - Nasdaq: DOWN 0.2 percent at 14,226.22 (close)

London - FTSE 100: UP 0.4 percent at 7,453.75 (close)

Paris - CAC 40: UP 0.6 percent at 7,310.77 (close)

Frankfurt - DAX: UP 0.3 percent at 16,215.43 (close)

EURO STOXX 50: UP 0.3 percent at 4,382.47 (close)

Tokyo - Nikkei 225: UP 0.5 percent at 33,486.89 (close)

Hong Kong - Hang Seng Index: UP 0.3 percent at 17,042.88 (close)

Shanghai - Composite: UP 0.3 percent at 3,029.67 (close)

West Texas Intermediate: DOWN 2.4 percent at $75.96 per barrel

Brent North Sea crude: DOWN 0.3 percent at $82.83 per barrel

Euro/dollar: DOWN at $1.0889 from $1.0969 on Wednesday.