LONDON, UK – Europe’s main stock markets shot higher on Friday, with Paris closing at a record high as shares in LVMH surged on record annual profits at the French luxury group.
Wall Street’s main indices pushed further into record territory as inflation dipped according to the US Federal Reserve’s preferred gauge.
By contrast, Hong Kong stocks slumped after rallying for much of the week, as traders awaited guidance on more Chinese stimulus.
Oil prices fell as traders banked profits from a strong week for crude.
“European indices are on the rise, as stronger commodity and banking stocks help the FTSE 100, and French luxury retailers basked in the glow of a 10-percent (plus) gain for LVMH,” noted Joshua Mahony, chief market analyst at Scope Markets.
The world’s largest luxury goods group soared 2.3 percent, with the Paris CAC 40 closing above 7,600 points for the first time, thanks to a 12.8 percent jump in LVMH shares.
Frankfurt rose only slightly Friday after a survey showed consumer sentiment had soured at the start of the year in Germany, Europe’s biggest economy.
In the United States, the Fed’s preferred gauge of inflation — the personal consumption expenditures index — held steady last month at 2.6 percent on a headline bases, in line with expectations.
The core PCE Price Index — which excludes volatile energy and food prices — fell to 2.9 percent from 3.2 percent in November.
Briefing.com analyst Patrick O’Hare noted that the inflation figure was the lowest since March 2021.
“The key takeaway from the report should be more Goldilocks than anything else: consumer spending is strong and core inflation, which the Fed is targeting, is moving toward the two percent target,” he said.
No recession concerns
Investors closely track inflation and other data for clues on whether it could prompt the Fed to cut rates soon this year.
Figures released on Thursday showed the US economy expanded a much better-than-expected 3.3 percent in the last three months of the year thanks to a strong jobs market and consumer spending.
“There are no recession concerns here, and to make matters even better, we don’t see any accompanying blowout growth in prices that are used in the GDP calculation,” said Charles Hepworth at GAM Investments.
“Stronger growth without inflation is what everyone wants.”
Michael Hewson of CMC Markets said the chances of a cut to US interest rates in March were slim, having been put at around 80 percent at the start of January.
“There is a danger that in cutting rates in March they drive market expectations of further cuts into overdrive, something they have been keen to push back on with recent commentary,” he noted.
But Callie Cox at eToro said the Fed is in a position where it can cut rates.
“The Fed’s job is basically done, and they have a good argument to cut rates and help stem risks in the job market,” she said.