The luxury goods sector lifts European stocks while markets await the US CPI test

European stock markets rose on Thursday, bolstered by gains in luxury brands after China eased some pandemic-era restrictions, while the dollar fell ahead of US inflation data that could influence the Fed’s policy path.

Economists polled by Reuters expect U.S. consumer inflation to rise slightly in July to 3.3% year-on-year, while the core figure, which excludes the volatile food and energy sectors, is expected to rise 0.2% in July, an increase of 4.8%. on an annual basis. on an annual basis.

“We are about to see our first headline inflation rally after 12 consecutive months of declining prices,” said Ben Laidler, global markets analyst at eToro.

“It will test the moderate narrative that has supported the rally, which is that inflation will fall allowing lower interest rates,” Laidler added.

Markets are pricing in a greater than 50% chance that the Fed will raise interest rates this year, CME FedWatch tool shows, as inflation subsides and the likelihood of a soft landing increases.

The pan-European benchmark STOXX 600 rose 0.6 percent in early European trade, supported by gains in the luxury goods sector after China lifted a group travel ban in the United States and other major markets.

Among the winners was LVMH, which rose 2%.

The French CAC 40 index – which is heavily weighted in luxury names – outperformed Europe, rising 1.1%, while the German DAX rose 0.5% and Britain’s FTSE 100 rose only 0.1%, under pressure from a number of venture capital firms. The big dividends went.

China value

Asian stocks stalled at two-week lows, still reeling from China’s slide into deflation and the announcement of a US ban on investment in China in sensitive technologies such as computer chips.

MSCI’s broadest index of Asia-Pacific shares outside Japan recently fell 0.1% and appears to be heading for a second straight week of losses. The technology sub-index fell to its lowest point in more than two months.

Chinese data released on Wednesday showed a contraction in consumer prices and further declines in factory prices in July, raising concerns about the faltering nature of the post-pandemic recovery.

China is the first G20 economy to record a year-on-year decline in consumer prices since Japan’s last negative CPI reading in August 2021.

Rodrigo Cattrell, chief currency analyst at the National Australia Bank, said it highlights “the need for more fiscal support if Beijing is to avoid the possibility of a deflationary trap”.

In currency markets, the dollar index, which tracks the greenback against six other currencies, fell 0.3%. The Japanese yen fell to a one-month low of 144.135 against the dollar, and got close to the psychologically important 145 level.

Meanwhile, the 10-year Treasury yield was little changed at 4.0127%, after declining Wednesday after a good auction acceptance for the 10-year note, with markets jittery over oversupply of bonds in the coming quarter.

“One trillion dollars will be floated in the next three months,” said Laidler of eToro.

“Any sign that the markets are digesting that well, that we got yesterday, will be picked up very well.”

Bond strategists polled by Reuters expect US Treasury yields to decline in the coming months, with the average expectation for the 10-year Treasury yields to be 3.60% over six months.

Oil prices rose to their highest level since November 2022, continuing to benefit from extended production restrictions by Saudi Arabia and Russia.

And US crude rose in its latest transactions, 0.3 percent, to $ 84.61 a barrel, and Brent crude recorded $ 87.82, up 0.3 percent during the day.

All eyes were also on European gas prices, after they rose as much as 35% on Wednesday, to their highest level since June 15, after news of possible strikes on Australian LNG facilities raised concerns about shipments going to Asia.

And on Thursday, the Dutch contract for the first month fell 12% to 37 euros per megawatt-hour, losing about half of the previous day’s earnings.