Macro

Global Stocks Hit Peak on US Inflation Slowdown Hope

Global equities hit record highs amid optimism on slowing U.S. inflation and mixed corporate earnings.

By Athena Xu

5/15, 01:23 EDT
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Key Takeaway

  • Global equities hit a record high, driven by optimism that US inflation is slowing, with the MSCI All Country World Index up 0.1%.
  • The index's nearly 6% rally since April reflects improved risk sentiment amid a weaker dollar and rebound in Chinese stocks.
  • Investors are hopeful ahead of an anticipated report showing US inflation moderation for the first time in six months.

Global Equities Touch Record Highs

Ahead of a crucial U.S. inflation report, global equities, as measured by the MSCI All Country World Index, rose to a record high, marking a nearly 6% rally since April. This surge reflects growing optimism, fueled by a faltering dollar and a rebound in Chinese equities. Investors are keenly awaiting the U.S. inflation data, projected to show a moderation in underlying inflation for the first time in six months, despite Federal Reserve Chair Jerome Powell's warnings that interest rates may need to stay elevated to combat inflation.

Inflation Expectations and Market Sentiment

The anticipation of the U.S. Consumer Price Index (CPI) report is high, with predictions leaning towards a moderation in core CPI, potentially marking the smallest annual increase in three years. This has led to a mixed sentiment in the market, with some investors hopeful for a "risk-on" reaction, while others remain cautious about persistent inflation re-anchoring expectations. The recent Producer Price Index (PPI) data, which came in higher than expected, has added to these concerns, suggesting that inflationary pressures may not be easing as quickly as hoped.

Corporate Earnings and Economic Indicators

Recent corporate earnings have shown a divergence in performance, particularly among Chinese internet giants, with Tencent Holdings Ltd. surging on revenue beats and Alibaba Group Holding Ltd. sliding on a profit plunge. In the U.S., companies like Home Depot reported declines in revenue and earnings, reflecting ongoing economic challenges. Additionally, the U.S. federal debt levels and credit card delinquencies have risen, signaling potential long-term economic risks despite short-term boosts to the economy.