US inflation rates rise prompts interest in global equities
By Dan Moore
06:59, 14 April 2021
A 0.6% rise in the US consumer price index for March has triggered increased activity in global equity markets, with technology stocks leading the way.
The increase in inflation, which is the largest since August 2012, prompted an easing in US Treasury bonds, and sent ripples through the business world. The price of gold rose by 0.9% to touch $1,747.6 a troy ounce, but it was tech stocks that reacted most positively.
Tech-based stocks respond to CPI rise
Despite the damage inflation can do to technology stock, which can be adversely affected by rising debt costs, investors in some of the big tech companies responded positively.
New York-based provider of equity and hedge fund indexes MSCI noted its gauge of equity performance in 50 countries jumped 0.34%, with increases of 2.4% for Apple, 1.0% for Microsoft and 0.6% for Amazon.
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A temporary inflation issue
Increased foreign demand and demand for higher risk equity stocks was one reason behind the prevailing optimism in the markets, while there is no indication that Federal Reserve chair Jerome Powell is set to revise his view that sizeable inflationary rise are anything other than temporary.
Carlo Franchini, head of institutional clients at Banca Ifigest SpA, said: “We’re just going to have a temporary flame-up in prices but there will not be any structural inflation that’s here to stay, Fed comments continue to be conciliatory.”
Global response
With confidence high that the 0.6% rise in inflation is a blip, markets around the world responded in a similar fashion to the US. The European pan-regional STOXX 600 Index closed up 0.12%, with technology stocks making gains, along with luxury consumer stocks.
Hong Kong’s Hang Seng Index led gains among the region’s major markets as it rose 1.24%.
In Australia, the S&S/ASX 200 Index climbed 0.52%, although the Straits Times Index in Singapore dipped 0.3%. This was put down to unexpected growth in the economy, though.
Good news for Bitcoin
Significant increases were also reported in cryptocurrencies, most notably Bitcoin, which attained a record price of $63,769. For more on Bitcoin’s recent successes, read here.
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