A global equities gauge rallied on Wednesday while U.S. Treasury yields fell after data showed core U.S. inflation rose less than expected in December, raising hopes that the Federal Reserve could ease rates further.
Oil prices rallied with support from a large draw in U.S. crude stockpiles and potential supply disruptions from new U.S. sanctions on Russia. But oil gains were limited as U.S. and Qatar said negotiators reached a deal to end the war in Gaza between Israel and Hamas, after 15 months of bloodshed.
Earlier, U.S. Bureau of Labor Statistics data showed the consumer price index (CPI) rose in line with expectations at an annual rate of 2.9% in December, from November’s 2.7%.
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But core inflation, which excludes food and energy prices, rose by 3.2%, which was below forecasts for 3.3%.
Investors were particularly encouraged by the latest inflation reading since data released on Tuesday showed that U.S. producer prices increased moderately in December.
“You have back-to-back readings of inflationary data that clearly suggest we’re in maybe a little bit better shape than was being talked about,” said Phil Blancato, chief market strategist at Osaic Wealth in New York.
“The market, which has been starving for some piece of good news really since after the election, has gotten something that’s a bit of a shot in the arm here, putting some sugar back in the punch bowl,” said Blancato, noting that earlier data and Fed comments had implied “inflation was turning sideways, if not heating up again.”
After Wednesday’s release, traders were pricing close-to-even odds the Fed would cut interest rates twice by the end of this year, with the first reduction to come in June.
Adding to Wednesday’s upbeat tone were bumper fourth-quarter results from the likes of JPMorgan, which reported its biggest annual profit on record, top asset manager BlackRock , which logged a record $11.6 billion in assets, and Goldman Sachs,
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