European stocks lift as US inflation slows to two-year low
London’s FTSE 100 edged higher on Tuesday, helped up by gains for mining stocks following a boost in oil prices.
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Your support makes all the difference.European stocks moved higher on Tuesday after new figures showed US inflation fell to a two-year low last month as the cost-of-living squeeze abates.
The US Consumer Prices Index fell to an annual rate of 4% in May, the lowest reading since March 2021 and the 11th month in a row that price rises have eased.
Signs of inflation nearing its 2% target could prompt policymakers in the world’s biggest economy to take a break from pushing borrowing costs higher.
Analysts expect the Federal Reserve to pause its cycle of interest rate hikes, leaving the current rate unchanged at between 5% and 5.25%, ahead of the decision being revealed on Wednesday.
Rates are likely to stay at restrictive levels and rate cuts are premature
Janet Mui, head of market analysis at wealth manager RBC Brewin Dolphin said: “While overall the data is welcoming, it is unlikely to change the Federal Reserve’s thinking that much.
“The fact that inflation is trending lower justifies a “pause” in a rate hike this week to evaluate the economic situation.
“However, core inflation at 5.3% and wage growth at 4.3% are well above target and so victory on inflation cannot be confidently declared.
“Therefore, rates are likely to stay at restrictive levels and rate cuts are premature.”
London’s FTSE 100 – which is sensitive to international news – edged higher on Tuesday, helped up by gains for mining stocks following a boost in oil prices.
It closed 24.09 points higher, or 0.32%, to 7,594.78.
Brent crude oil surged by 3.2% to 74.11 US dollars per barrel.
It was a positive session for other European markets. Germany’s Dax rose 0.83% and France’s Cac closed 0.56% higher.
US stocks opened firmly in the green following the official inflation figures. The S&P 500 was up 0.7% and Dow Jones was up 0.5% when European markets closed.
The pound enjoyed a rebound, jumping 0.5% against the euro to 1.1683 and up 0.8% against the US dollar to 1.2608.
In company news, shares in housebuilder Bellway dipped after the company cautioned over a slowdown in demand for private properties.
The FTSE 250-listed firm said it had seen an improvement in demand over the spring compared to a more challenging end to last year.
But bosses remain “mindful” that cost-of-living pressures and higher interest rates could continue to have an impact.
Shares in Bellway fell by nearly 3%.
Elsewhere, energy giant Centrica told shareholders at its annual general meeting that profits will be “significantly higher” than previous years in its household energy business over the first half of 2023.
The boost will be felt by its retail division, which includes British Gas. Nevertheless, shares in Centrica dipped by 0.2%.
The biggest risers on the FTSE 100 were Glencore, up 23.05p to 460p, Antofagasta, up 51.5p to 1,507p, Anglo American, up 66.5p to 2,483p, Rio Tinto, up 135p to 5,203p, and Flutter Entertainment, up 385p to 15,775p.
The biggest fallers on the FTSE 100 were Admiral Group, down 119p to 2,209p, Persimmon, down 53.5p to 1,167p, Segro, down 28.8p to 750.6p, Taylor Wimpey, down 3.7p to 110.9p, and Barratt Developments, down 12.7p to 452.3p.