Yahoo Finance FTSE and Wall Street surge ahead as US inflation slows to 7.1%
European stock markets advanced on Tuesday as US inflation slowed to 7.1% in the year to November compared to 12 months ago. This came in lower than the 7.3% expected by analysts, and was a drop from 7.7% in October.
In London, the FTSE 100 (^FTSE) surged 0.7% on the day, as gains in energy stocks outpaced weakness in consumer staples. The CAC (^FCHI) was 1.4% higher in Paris, and the DAX (^GDAXI) was up 1.3% in Frankfurt.
It came as rail workers at the Rail, Maritime and Transport (RMT) started four weeks of industrial action. The strikes are set to cause chaos for commuters across the country and misery for people with Christmas travel plans.
Postal workers, nurses, paramedics and Border Force staff are also striking this month, which is expected to cause mass disruption, with thousands of NHS operations and appointments cancelled.
There were 417,000 working days lost because of strikes in October, which is the highest since November 2011.
Transport Secretary Mark Harper claimed the “tide is turning” within unions about strike action, despite the RMT walkout. He told GB News that a “fair and reasonable offer” had been made to rail workers.
“One of the unions accepted that offer – Unite workers have accepted it, the TSSA have recommended acceptance and we’ll get their ballot results later this week,” he said.
Michael Hewson of CMC Markets said: “The ongoing strike action could well have significant second round effects in the New Year, particularly in hospitality where it could be the last straw for a lot of struggling businesses, which rely on Christmas trade to tide them over the quieter months of January and February.”
Read more: UK economy returned to growth in October with 0.5% rise in GDP
Meanwhile, data from the Office for National Statistics (ONS) revealed that Britain's employment rate for the three months to October increased by 0.2 percentage points to 75.6% but is still below pre-pandemic levels.
The rate of UK unemployment rose to 3.7% in the three months to October, up from 3.6% in the previous quarter. But wages in Britain are rising faster than at almost any time in at least two decades, although well below inflation.
Watch: How does inflation affect interest rates?
Across the pond, the S&P 500 (^GSPC) gained 1.6% and the tech-heavy Nasdaq (^IXIC) rose 2.3% by the time of the European close. The Dow Jones (^DJI) pushed 0.8% higher.
The US inflation data gives the Federal Reserve more reason to start scaling back the size of its interest rate increases on Wednesday. It was the smallest inflation increase since last December.
US central bankers will meet this week to decide whether to raise the cost of borrowing. Policymakers have already increased rates six times this year to 4% in an effort to push down high inflation.
Core inflation, which strips out volatile food and energy price movements, also eased back more than expected to 6%, from a previous increase of 6.3%.
Richard Carter, head of fixed interest research at Quilter Cheviot, said: "While the war against inflation is turning, we are a long way off declaring victory and the Fed will keep its hawkish stance for a while longer, even if it does potentially force a recession.
"We are still likely to see at least a 50bps rise in interest rates tomorrow from the Fed, but we cannot rule out further hawkish moves should other data points refuse to budge as quickly as investors would like. For now, though, a soft landing for the economy remains on the table and markets may just start looking more into the future for a pivot from the central bank.”
Read more: Bank of England: 4 million mortgages to rise next year
On Monday, Wall Street saw a more positive session, finishing higher and pulling back some of the losses seen last week, with the gains evenly spread.
Asian stock markets mostly rose overnight following optimism on Wall Street that the US Federal Reserve and other central banks would ease off on the pace at which interest rates have been hiked.
In Tokyo, the Nikkei (^N225) climbed 0.4% while the Hang Seng (^HSI) gained 0.7% in Hong Kong after announcing a further easing of COVID restrictions. The Shanghai Composite (000001.SS) slipped 0.1% on the day.
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