Global stock markets climb as US producer inflation cools

A man is reflected on the window of a brokerage displaying a digital board with the Japanese yen rate versus the US dollar, along a street in Tokyo on August 13, 2024. (Photo by Richard A. Brooks / AFP)

New York, United States — Global stocks rose on Tuesday as slowing US producer inflation boosted hopes of interest rate cuts from the Federal Reserve.

On Wall Street, all three major indices finished higher, led by the tech-rich Nasdaq, which closed up more than 2.4 percent.

“The trend in inflation is leading in the right direction, and today was good news,” Tom Cahill, of Ventura Wealth Management, told AFP.

“That suggests that the Fed will very likely cut the rates,” he added.

READ: US producer inflation cooler than expected in July

Shares in Starbucks jumped by 24.5 percent after the coffee shop chain announced that Chipotle chief executive Brian Niccol would take over as chairman and CEO next month.

The leadership shifts come as Starbucks pushes to turn around its business, while contending with broad-based sales declines in its most recent financial results.

Chipotle shares slumped by 7.5 percent.

PPI cooler than expected 

The week’s main focus is expected to be US consumer inflation figures out on Wednesday, which could influence the Federal Reserve’s monetary policy decision-making.

However, investors got reassuring data on Tuesday, with the US Labor Department’s producer price index (PPI) for July rising by just 0.1 percent, down slightly from a 0.2 rise in June.

This was slightly cooler than the median forecast of economists surveyed by Dow Jones Newswires and The Wall Street Journal.

READ: US wholesale prices unexpectedly dropped in May

So-called “core PPI” excluding volatile food and energy prices was flat.

On an annual basis, PPI came in at 2.2 percent, down sharply from a revised 2.7 percent rise a month earlier.

“The key takeaway from the report is the disinflation trend in total and core PPI, as that is moving in a necessary direction to drive a rate cut by the Fed,” said Briefing.com analyst Patrick O’Hare.

The Fed is widely expected to make a first interest rate cut in September, and markets expect it to make at least a second one this year.

Europe, Asia higher 

Tokyo surged in Asian trading, with traders catching up with Monday’s gains elsewhere after a long holiday weekend in Japan.

London ended the day higher after data showed Britain’s unemployment rate had unexpectedly dropped in the second quarter and wage growth slowed to the lowest level in nearly two years.

Frankfurt also rose despite data showing German investor confidence worsened more than expected in August, as a hoped-for recovery in Europe’s largest economy remains out of reach.

The ZEW institute’s closely-watched economic expectations index fell to 19.2 points, a steep drop of 22.6 points from a month earlier.

Crude futures dropped but remained well up over the week owing to an escalation of tensions in the Middle East.

The White House had warned that a “significant set of attacks” by Iran and its proxies against Israel was possible as soon as this week after top leaders of Hezbollah and Hamas were assassinated in late July.

But on Tuesday, US President Joe Biden said that a ceasefire deal in Gaza could deter Iran from attacking Israel.

Key figures around 2030 GMT 

New York – Dow: UP 1.0 percent at 39,765.64 points (close)

New York – S&P 500: UP 1.7 percent at 5,434.43 (close)

New York – Nasdaq Composite: UP 2.4 percent at 17,187.61

London – FTSE 100: UP 0.3 percent at 8,235.23 (close)

Paris – CAC 40: UP 0.4 percent at 7,275.87 (close)

Frankfurt – DAX: UP 0.5 percent at 17,812.05 (close)

EURO STOXX 50: UP 0.5 percent at 4,694.92 (close)

Tokyo – Nikkei 225: UP 3.5 percent at 36,232.51 (close)

Hong Kong – Hang Seng Index: UP 0.4 percent at 17,174.06 (close)

Shanghai – Composite: UP 0.3 percent at 2,867.95 (close)

Euro/dollar: UP at $1.0998 from $1.0931 on Monday

Pound/dollar: UP at $1.2867 from $1.2766

Dollar/yen: DOWN at 146.80 yen from 147.26 yen

Euro/pound: DOWN at 85.46 pence from 85.61 pence

West Texas Intermediate: DOWN 2.1 percent at $76.80 per barrel

Brent North Sea Crude: DOWN 2.0 percent at $80.69 per barrel