San Francisco Frontiers - Stocks rise as US inflation cools

US consumer prices rose by 5.0 percent last month on an annual basis, down from 6.0 percent in February, according to official figures. It was the smallest increase since May 2021 and better than forecast by analysts.

Wall Street opened higher while European equities rose in afternoon deals, with Paris hitting a record high before the inflation data's release. The dollar fell against other major currencies.

The Fed and other major central banks have raised interest rates in efforts to battle inflation after Russia's war in Ukraine sent energy and food prices soaring last year.

Investors have worried that the rate hikes could tip the US economy into recession.

The collapse of three US regional banks last month was largely blamed on the higher borrowing costs.

"In light of this (inflation) announcement, the probability of further significant interest rate hikes will now seem less likely," said Srijan Katyal, global head of strategy at ADSS brokerage firm.

"This would be welcomed by those still calling on the Fed to take a steady, measured approach in the wake of the banking crisis that rippled across the world in March," Katyal said.

Concerns about the financial sector, which also led to the emergency takeover of European banking giant Credit Suisse by UBS last month, have eased.

On Tuesday, Neel Kashkari, president of the Minneapolis Fed, said: "I'm not ready to declare all clear, but there are hopeful signs that these risks are now better understood and calm is being restored."

Analysts said the next few days could play a key role in market sentiment, as Wednesday's consumer prices report will be followed by data on wholesale prices Thursday, then the start of the corporate reporting season on Friday.

- 'Be careful' -

A healthy US jobs report on Friday soothed worries about a possible recession, but it could also give wiggle room for the Fed to continue its monetary tightening.

There is a growing hope among traders that the Fed, whose next rate decision is in May, will stop lifting rates soon and could even begin cutting before the end of the year.

"The market's immediate response seems to be that we are now a lot closer to the peak in terms of interest rate hikes," said Fawad Razaqzada, market analyst at City Index and FOREX.com.

There appears to be a split within the Fed over the best way forward.

Chicago Fed boss Austan Goolsbee urged "prudence and patience", saying officials should weigh the effects on the economy of a year-long campaign of tightening as well as the banking upheaval.

"Given how uncertainty abounds about where these financial headwinds are going, I think we need to be cautious," he said in prepared remarks at an event hosted by the Economic Club of Chicago.

"We should gather further data and be careful about raising rates too aggressively until we see how much work the headwinds are doing for us in getting down inflation."

However, his New York counterpart John Williams said another increase before pausing was a "reasonable starting place", adding that incoming data should be noted in the decision-making.

- Key figures around 1340 GMT -

New York - Dow: UP 0.5 percent at 33,845.22 points

London - FTSE 100: UP 0.6 percent at 7,832.90

Paris - CAC 40: UP 0.3 percent at 7,413.90

Frankfurt - DAX: UP 0.4 percent at 15,717.16

EURO STOXX 50: UP 0.2 percent at 4,343.75

Tokyo - Nikkei 225: UP 0.6 percent at 28,082.70 (close)

Hong Kong - Hang Seng Index: DOWN 0.9 percent at 20,309.86 (close)

Shanghai - Composite: UP 0.4 percent at 3,327.18 (close)

Euro/dollar: UP at $1.0977 from $1.0918 on Tuesday

Pound/dollar: UP at $1.2467 from $1.2428

Euro/pound: UP at 88.09 pence at 87.83 pence

Dollar/yen: DOWN at 133.21 yen from 133.69 yen

West Texas Intermediate: UP 0.9 at $82.23 per barrel

Brent North Sea crude: UP 0.9 percent at $86.38 per barrel

burs-lth/jj

D.Robinson--SFF