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The Trader: Stocks shrug off higher inflation, gold up as yields are pinned

A positive reaction on London's markets to strong economic data out of the UK this morning
The Trader: Stocks shrug off higher inflation, gold up as yields are pinned

 

  • European shares are in positive territory
  • Fresh highs on Wall Street
  • Inflation fears are brushed off, for now

A mildly positive start to the Friday session for European markets after Wall Street set fresh records, with the S&P 500 jumping to a new all-time high even as data showed US inflation surged in May. US CPI rose to 5 per cent last month, whilst the core reading rose to +3.8 per cent, the highest in 30 years. Core month-on-month declined from 0.9 per cent in April to 0.7 per cent in May but still remains extremely high. Rates actually fell with the 10yr Treasury under 1.44 per cent, sending the dollar to under 90 and gold firmer. 

Hot inflation readings right now are pretty much fully priced and understood, as is the reaction function of central banks: they see it as transitory, nothing to worry about. This was evinced by the European Central Bank yesterday, which stuck to the inflation-is-temporary script. It raised expectations for growth and inflation this year but sees inflation at just 1.4 per cent in 2023. The message from the ECB was that things are much better, but we are not about to ease off. 

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