Global stocks rebound, U.S. Treasury yields fall on inflation data

  • U.S. consumer spending rises, inflation slows
  • Wall Street bounces back, snaps weekly losing streak
  • Treasury yields fall
  • Brent crude up $2

NEW YORK, May 27 (Reuters) – Global markets broadly rose on Friday, while benchmark U.S. Treasury yields fell after data showed U.S. consumer spending increased in April and inflation slowed, two signs that the U.S. is The world’s largest economy is on track for growth this quarter.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.9% last month, although inflation continued to rise in April, but slower than in recent months. The personal consumption expenditures (PCE) price index rose 0.2%, the smallest gain since November 2020.read more

Wall Street rose on Friday after the data, with all three major U.S. stock indexes decisively ending their longest weekly losses in decades.read more

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The Fed called inflation a serious problem in the minutes of its May meeting released earlier this week. Most central bankers support two 0.5 percentage point rate hikes in June and July, as the group tries to tame inflation without causing a recession.

The Fed does leave room for a pause in rate hikes if the economy weakens.read more

Analysts said consumer spending and inflation data were encouraging and supported most of the above-2.0 annualized growth forecast for the second quarter.

“It’s important that the growth engine of the U.S. economy remains active,” said Joe Quinlan, head of market strategy, CIO, Merrill Lynch and Bank of America Private Bank. Weeks are seeing better, as far as inflation might peak here. Maybe we can avoid stagflation.”

MSCI World Equity Index (.MIWD00000PUS)Shares, which track stocks in 45 countries, were up 2.12% at 4:45 p.m. ET (2045 GMT).

Global equity funds saw inflows in the week to May 25, the first week in seven, according to Refinitiv Lipper data.read more

European stocks (.STOXX) It hit a three-week high, up 1.42%.FTSE (.FTSE) It also hit a three-week high and is on track for its best weekly performance since mid-March.

Dow Jones Industrial Average (.DJI) The S&P 500 gained 575.77 points, or 1.76%, to 33,212.96 (.SPX) Up 100.4 points, or 2.47%, to 4,158.24 and the Nasdaq Composite <.IXIC<> up 390.48 points, or 3.33%, to 12,131.13.

The yield on the benchmark 10-year Treasury note was last at 2.7432%. It hit a three-year high of 3.2030% earlier this month amid concerns the Fed may have to raise rates quickly to keep inflation in check.

Bank of America’s Quinlan said the lower yields showed the Fed’s monetary policy was successful in tightening credit and slowing prices.

“The 10-year yield suggests we don’t have to let inflation break through 9-10%,” Quinlan said. “We are approaching the peak of inflation.”

The two-year yield rose as traders expected a hike in the federal funds rate, falling to 2.4839%.

German 10-year bond yields fell 4 basis points to 0.955%.

Asian Equities (.MIAPJ0000PUS) Also benefited from hopes of stabilizing Sino-U.S. relations and more stimulus from the Chinese government.read more

U.S. Secretary of State Anthony Blinken said in a speech on Thursday that the United States would not stop China from expanding its economy, but wanted China to abide by international rules, which some investors interpreted as beneficial for bilateral relations.read more

Emerging market stocks rose 1.98%. MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) It closed up 2.17%, while Japan’s Nikkei (.N225) rose 0.66%.

The generally positive market sentiment pushed the USD/currency index to a one-month low.

The dollar index fell 0.059%, with the euro up 0.06% to $1.073.

Oil prices were near two-month highs amid rising U.S. gasoline consumption during the summer and a potential European Union ban on Russian oil.

U.S. crude settled up 98 cents, or 0.86%, at $115.07 a barrel. Brent crude settled up $2.03, or 1.73%, at $119.43 a barrel.

Spot gold rose 0.2% to $1,852.83 an ounce.

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Reporting by Elizabeth Dilts Marshall in New York Additional reporting by Chuck Mikolajczak in New York, Carolyn Cohn in London, Stella Qiu in Beijing and Kevin Buckland in Tokyo; Editing by Chizu Nomiyama, Alistair Bell and Matthew Lewis

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