Stock markets posted their biggest day of gains in years on Thursday on a surge of optimism that the inflationary crisis that has slowed spending and pushed up interest rates may have peaked.
Here, consumer inflation hit 9.2 percent in October, the highest since 1984, according to new figures from the Central Statistics Office (CSO). But that incredibly high figure was less than the double-digit level many had feared would be breached when a round of gas and electricity price hikes took effect later in the month.
“Inflation was probably at or near its peak in October,” said Conall MacCoille, chief economist at Davy Stockbrokers.
While some hikes in household electricity prices may not be fully felt here yet – contributing to November inflation – prices in Europe’s wholesale gas markets have returned, reducing the risk of further hikes along the way, he said.
Energy price hikes, fueled by the aftermath of the Russian invasion of Ukraine, have been the main reason for the strong pace of inflation here and in Europe over the past 10 months, although commodity prices had already risen in late 2021 following the Covid lockdowns.
However, any optimism that the worst is over should be tempered by the risks that a new wave of higher prices could be triggered, he added.
Nevertheless, the latest US data in particular triggered a large wave of investor optimism on Thursday, which led to rapid and large market movements worldwide.
This comes after an official government report showed that US price inflation slowed for the fourth straight month in October. The October reading of 7.7 percent would have looked dreadful a year ago, but markets shot higher as the figure was even better than economists’ forecasts and well below the pace of 9.1 percent in June. That’s enough to ease the pressure on the US Federal Reserve to continue its grueling round of rate hikes.
US household inflation expectations figures, which are a guide to spending plans and likely wage demands, will help further steer expectations of the Fed’s likely course of action.
Meanwhile, stock markets burned on Thursday. The S&P 500 index of major US stocks was up 4.5 percent in afternoon trade, a massive move that translated into cash values in the region of $1 trillion.
The composite Nasdaq index, top-heavy with tech stocks, rose 6 percent, helping reverse some of the impact of a few weeks of hurting the unpopular sector.
In Ireland, the Iseq 20 index of Ireland’s largest stocks rose a whopping 3.58 per cent, led by CRH, Kerry Group and Kingspan, which are among Irish companies most exposed to global trends. European stocks almost hit a two-month high.
Expectations that the Fed might cool off, if not stop, its rate hikes helped weaken the dollar and push the euro back above parity to $1.0166.
Bond yields fell, a good indication that investors are relatively less fearful and more optimistic.
Despite a collective optimism among investors, if the markets are right, most of us can only hope that things won’t get any worse. There is little prospect that the higher prices now being paid in a range of areas, from heating bills to food and clothing, will actually reverse.
https://www.independent.ie/business/signs-grow-that-inflation-is-at-or-even-past-the-peak-after-hitting-38-year-high-42135627.html Evidence is mounting that inflation has peaked or even surpassed it after hitting a 38-year high