European markets staged a rally late Wednesday afternoon after a key US inflation print showed price rises slowing faster than expected, reports CNBC.
The pan-European Stoxx 600 closed up by 1 per cent provisionally, having earlier hovered around the flatline for much of the trading session. Retail shares climbed 3 per cent to lead gains as almost all sectors and major bourses entered positive territory.
US consumer prices rose 8.5 per cent annually in July, slowing from the previous month in large part due to a drop in oil prices. Economists surveyed by Dow Jones were expecting headline CPI to increase 8.7 per cent on an annual basis and 0.2 per cent monthly.
The easing of inflation will inform the US Federal Reserve's monetary tightening trajectory ahead of its September meeting.
US stock futures roared higher shortly before the opening bell in the wake of the report, with Wall Street on course for a rebound after the S&P 500 and Nasdaq fell for a third consecutive day during Tuesday's regular trading hours.
While much will be made of the indication that headline inflation may be peaking, core inflation remained significantly above target, meaning it is far too early for the Fed to "declare victory" and cease raising interest rates, according to Mike Bell, global market strategist at JPMorgan Asset Management.
"With the Atlanta Fed's measure of wage growth now at 6.7 per cent, core inflation is unlikely to return to anywhere near target until wage pressures moderate significantly," Bell said in reaction to the figures.
With unemployment at the lowest level in over 50 years and workers demanding pay rises to try to keep up with inflation, Bell suggested wage growth is unlikely to moderate sufficiently to return inflation to the Fed's target, without first seeing a rise in unemployment.
"So while a peak in inflation is welcome news, it's probably not enough to allow the Fed to ease off its tightening or to put recession fears to bed."
Shares in Asia-Pacific declined on Wednesday, led by more than 2 per cent losses for Hong Kong's Hang Seng index after Chinese inflation data rose. The producer price index for July rose by 4.2 per cent annually while consumer prices increased by 2.7 per cent, both slightly below analyst expectations.
On the data front in Europe, German final July consumer price inflation came in at 7.5 per cent year-on-year and 0.9 per cent monthly, official figures revealed Wednesday, roughly in line with expectations.
Earnings remain a key driver of individual share price movement in Europe. Ahold Delhaize, ABN AMRO, E.On, TUI Group, Metro, Deliveroo, Prudential and Aviva were among the major companies reporting before the bell on Wednesday.
