Global stocks rise as investors shrug off US inflation data

LONDON — Stock markets rose and the dollar fell against most currencies on Wednesday despite figures showing US inflation rising at its fastest pace since June 1982.

The US consumer price index (CPI) jumped 7 per cent in 2021, the highest increase since June 1982, adding pressure on authorities to tame surging inflation wave brought on by the pandemic and response efforts.

But investors appeared to take the data in their stride after Federal Reserve chief Jerome Powell indicated on Tuesday he was ready to raise interest rates while trying to preserve the US recovery from the COVID-19 crisis.

US and European stocks all pushed higher after the inflation data, with the tech-rich Nasdaq, which had been particularly jittery at the start of the year, rising 1 per cent at the start of trading.

"It looks like the market had prepared for even hotter inflation, which obviously didn't materialise. So the reaction can best be described as relief," said Fawad Razaqzada, an analyst at ThinkMarkets. 

Fears of an abrupt end to the ultra-loose monetary policies, which have helped power a two-year market rally, made for a torrid start to trading this year. But on Wednesday, the mood appeared resolutely upbeat.

European and US markets appeared sanguine about the price rises in the world's biggest economy after Powell's reassurances on Tuesday.

Oil prices also rose on Tuesday whereas the dollar was down.

While most observers expect equities to endure some tough times in the near future, they remain broadly upbeat about the outlook for this year.

"It would appear relentless optimism is perhaps returning to the markets and dip buyers are diving back in, Craig Erlam, senior market analyst at Oanda, wrote in a note to clients.