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Inflation fear deflates investor euphoria for stocks and AI fever

Inflation fear deflates investor euphoria for stocks and AI fever

Nvidia shares gained 12% this week, but failed to lift the overall market mood, which was hit by data indicating an acceleration in inflation in the United States.

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World stock markets fall this Friday and are headed for a weekly loss due to data that indicated an acceleration in inflation in the United States, which offset the improvement in confidence derived from the good results of Nvidiathe giant of artificial intelligence.

The MSCI world equity index, which had reached intraday highs earlier in the week, fell 0.2%, heading for a weekly decline of 0.9%. For its part, the pan-European index STOXX 600 decreases 0.5%. Nvidia, valued at $2.6 billion, has been responsible for almost a third of the total return of the US stock market this year. The run-up to the release of its quarterly results on Wednesday kept traders in suspense for days.

Nvidia shares gained 12% this week, but they failed to lift the general mood of the market, which was affected by surveys that showed an improvement in American business activity, although companies also reported an increase in the prices of various inputs, from wood to salaries. Wall Street’s S&P 500 index was down 0.7% this week, although futures indicated a possible higher opening later in the session.

Minutes from the Federal Reserve’s latest meeting, released Wednesday, revealed that some policymakers could consider raising benchmark interest rates above their current 23-year high, which is between 5.25% and 5.5%, if inflation does not decline steadily towards the average target of 2%. Traders now expect just 35 basis points of Fed rate cuts in 2024, compared with 150 basis points expected at the start of the year.

Markets: what investors analyze

Neil Birrell, chief investment officer at Premier Miton Investors, said stock markets may not rise much further if expectations of higher rates continue to push up Treasury yields, making stocks less attractive by comparison. “Earnings are solid, but the bar for the kind of bullish surprise needed to drive markets higher is rising,” he said. “A rise in bond yields toward 5% is the kind of thing that worries people.”

Stocks took a hit in October when the yield on benchmark 10-year notes hit 5%. This yield, which rises as the bond price falls in response to expectations of higher rates, touched 4.498% on Thursday and was last at 4.475%.

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The dollar index, which compares the greenback with a basket of six prominent currencies, accumulated a weekly rise of 0.4%, reaching 105.06 units, its largest weekly increase since mid-April. The US currency gained 0.4% against the euro and 0.9% against the yen. Sterling was trading at $1.269, having hit a two-month high of $1.2761 on Wednesday, following a report showing British inflation did not slow as much as expected in April.

In the commodities market, oil prices fell about 0.5%, while gold rose 0.5% to $2,340 an ounce.

Source: Ambito

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