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Global bond markets rebounded and stocks surged on Friday at the end of a quarter of heavy losses, helped by signs of easing inflation in the US and eurozone.
Yields on European sovereign debt slid, as investors welcomed data showing the eurozone’s harmonised index of consumer prices fell from 5.2 per cent in August to 4.3 per cent in September. Core inflation, which excludes energy and food and is closely watched by the European Central Bank, fell more than expected to 4.5 per cent, down from 5.3 per cent in August.
Italian 10-year government bond yields fell 0.17 percentage points to 4.75 per cent, having hit their highest level in a decade on Thursday. German 10-year bond yields dropped 0.14 percentage points to 2.82 per cent, having also hit a 10-year high during the previous trading session. Bond yields move inversely to prices.
In the US, core PCE inflation fell from 4.3 per cent in July to 3.9 per cent in August, in line with economists’ forecasts, while headline inflation increased from 3.4 per cent to 3.5 per cent.
The yield on the benchmark 10-year US Treasuries, which this week hit its highest level since 2007, slipped 0.08 percentage points to 4.51 per cent. Two-year Treasury yields, which move with interest rate expectations, inched up after the data but remained lower on the day at 5.05 per cent.
In equity markets, Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq Composite gained 0.7 per cent and 1.1 per cent respectively.
Europe’s region-wide Stoxx 600 added 1.1 per cent and Germany’s Dax rose 1.2 per cent. London’s FTSE 100 was up 0.6 per cent after fresh data showed the UK economy recovered from the pandemic faster than previously estimated, while France’s Cac 40 index gained 1.1 per cent after domestic inflation increased at a slower annual pace than expected in September.
Despite expectations that inflation will slow, markets have been grappling with the prospect of interest rates remaining high for an extended period. Investors have also had to weigh the impact of surging oil prices, which have risen 35 per cent in the past two months on lower global output.
Brent crude futures fell 0.1 per cent to $95.26 a barrel, while the US benchmark WTI contract dropped 0.8 per cent to $91.02.
Chinese tech stocks jumped on Friday after the country’s top internet regulator released a draft rule simplifying cross-border data transfers.
Hong Kong’s Hang Seng index rose 2.5 per cent, while the Hang Seng Tech index, a gauge tracking the top 30 technology companies, climbed 3.8 per cent.
Internet companies Tencent and Alibaba rose 3 per cent and 2.2 per cent respectively, while electric vehicle start-up Xpeng 4.1 per cent. Trading was closed in mainland China for a holiday.
With additional reporting by Gloria Li in Hong Kong
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