Stocks Around 2023 Highs As Disinflation Signals Bring Some Relief

• Global stocks traded around their highs for the year on Thursday as investors bet that the Federal Reserve was finally taming inflation and could end its rate-hiking cycle as soon as this month.
• S. data on Wednesday showed consumer prices rose modestly in June, registering the smallest annual increase in more than two years as the economy shifted into disinflation mode, helping to send oil prices higher.
• However, the prospect of an end to rising borrowing costs, in the United States at least, kept downward pressure on the dollar, which fell to its lowest in more than a year against the euro on Wednesday on the U.S. inflation news.
• Interest rate futures showed markets have fully priced in another rate hike from the Federal Open Market Committee (FOMC) later this month, but expectations of any further increases have faded.
• Eren Osman, managing director of wealth management at Arbuthnot Latham & Co, said the U.S. inflation news was encouraging, though markets will be scrutinising the U.S. jobs data later on Thursday for signs of continued softening to underpin the disinflation story. "Let's give it a little cheer, but I wouldn't start to extrapolate that to mean job done and no more hikes," Osman said.
• "There is at least one more hike coming out of the Fed, but I do think it means investors should feel very comfortable about looking to add duration to their portfolios now, and that is something we are looking to do ourselves. The risk is really to the downside here from yields," Osman said.

(Source: Reuters)