San Francisco Frontiers - Stocks rise after US inflation data doesn't change rate outlook

The annual rise in consumer price index (CPI) came in at 3.2 percent last month, the Labor Department said, while the "core" measure stripping out volatile food and energy prices rose 3.8 percent.

Both were slightly higher than expected, but not enough to deter expectations that rates may start coming down this summer.

"Though the report didn't show much progress on the price front, the market's initial muted reaction could suggest investors welcomed any progress, however light," said Joe Mazzola, an analyst at Charles Schwab. "The progress here being the slight dip in the annual core rate."

The start of the year often sees a blip in inflation, said Chris Beauchamp, an analyst at trading platform IG. Last year "started off with resurgent inflation and then saw it ease. If 2024 follows a similar pattern then we may still get our June rate cut," he told AFP.

The US Federal Reserve has indicated it expects to cut interest rates this year, but first has to see the inflation rate slow convincingly towards its 2 percent target.

The main US stock indices were at times in the red in volatile morning trading as the report was interpreted in various ways, but by midday in New York they were comfortably higher and on their way to record closes.

European shares opened higher and held on to their gains throughout the day, with the main indexes closing up around one percent.

Kathleen Brooks, an analyst at XTB.com, pointed out that Wall Street continued its recent rally after a similarly disappointing CPI report a month ago.

"We don't think that the February number will knock the rally in stocks in the short term," she said, with the stock market's recent health being driven as much by strong corporate results as the interest rate outlook.

"Overall, we expect financial markets to trade with a cautious tone in the coming days leading up to next week’s Fed meeting," she said.

More data are coming out later this week with producer prices and retail sales on Thursday, and consumer sentiment on Friday, before the Federal Reserve meets on March 19 and 20 to discuss its interest rate policy.

London was boosted by official British unemployment and wages data that boosted hopes of a cut to UK interest rates in the coming months.

"Investors got some cheer from the latest jobs numbers which showed a slowdown in wages and a pick-up in the Unemployment Rate. Put together, these raise the likelihood of a rate cut at the Bank of England's June meeting," said David Morrison, senior market analyst at Trade Nation.

Hong Kong shares continued their recent advances, climbing more than three percent, helped by fresh buying of tech firms.

Electronics giant Xiaomi surged more than 10 percent after saying it would start deliveries of its first electric vehicle by the end of this month.

However, Tokyo fell again as speculation swirls that the Bank of Japan will next week shift away from its ultra-loose monetary policy.

- Key figures around 1640 GMT -

New York - Dow: UP 0.2 percent at 38,848.60 points

New York - S&P 500: UP 0.6 percent at 5,149.58

New York - Nasdaq Composite: UP 0.9 percent at 16,158.81

London - FTSE 100: UP 1.0 percent at 7,747.81 (close)

Paris - CAC 40: UP 0.8 percent at 8,087.48 (close)

Frankfurt - DAX: UP 1.2 percent at 17,965.11 (close)

EURO STOXX 50: UP 1.1 percent at 4,983.20 (close)

Tokyo - Nikkei 225: DOWN 0.1 percent at 38,797.51 (close)

Hong Kong - Hang Seng Index: UP 3.1 percent at 17,093.50 (close)

Shanghai - Composite: DOWN 0.4 percent at 3,055.94 (close)

Dollar/yen: UP at 147.72 yen from 146.96 yen on Monday

Euro/dollar: DOWN at $1.0918 from $1.0929

Pound/dollar: DOWN at $1.2780 from $1.2812

Euro/pound: UP at 85.45 pence from 85.28 pence

Brent North Sea Crude: DOWN 0.6 percent at $82.66 per barrel

West Texas Intermediate: DOWN 0.7 percent at $78.45 per barrel

burs-gv/RL

P.Adams--SFF