Cooling US inflation revives risk appetite on Wall St

Stocks on Wall Street bounced back after a cooler pace of inflation than anticipated stoked expectations for the Federal Reserve to keep cutting its key rate next year, and bolstered demand for riskier assets such as Bitcoin.

The tech-heavy Nasdaq Composite was the main beneficiary, with Micron Technology soaring after lifting its forecast as demand from artificial intelligence developers is set to squeeze supply for memory storage products.

Meanwhile, European stock markets were stronger after the Bank of England cut its key rate and the European Central Bank held steady as inflation remained near its target in a sign of the continent’s resilience to US President Donald Trump’s wide-ranging tariff regime.

In the antipodes, Australian futures are pointing to a strong opening for the S&P/ASX 200 index when trading opens across the Tasman, while local data include Statistics New Zealand’s monthly merchandise trade figures and ANZ’s consumer and business confidence surveys.

Normal service resumes

Stocks on Wall Street rallied, with the S&P 500 up 1.1% in late trading and the Dow Jones Industrial Average gaining 0.4% as the 2.7% annual pace of US inflation fell short of the 3.1% forecast, firming expectations for the Federal Reserve to keep cutting its benchmark rate next year, with the yield on 10-year US treasuries easing.

Economists cautioned reading too much into the inflation data given collection only resumed in the middle of the month due to the protracted US federal government shutdown.

The volatility index, known as Wall Street’s fear gauge, dropped 7.4%, while Bitcoin climbed 0.7% to US$86,411 at 7am in Auckland.

“Softer than expected US CPI data reinforced expectations for further rate cuts by the Federal Reserve and contributed to solid rally for equity markets,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “Global government bond yields are broadly lower while the US dollar is little changed against the major FX pairings.”

The tech-heavy Nasdaq climbed 1.7% in late trading, with memory provider Micron Technology surging 14% after the company raised its outlook for demand as AI developers scramble for products, putting a squeeze on supply. Among chipmakers and semiconductor firms, Nvidia advanced 2.4% in late trading, while Intel and Broadcom were also on the green side of the ledger.

NZX-listed components maker Rakon was unchanged yesterday, and has gained 31% so far this year.

Sharesies’ favourite Rocket Lab climbed 9.2% to US$58.94 after a successful and early launch for the US Space Force’s Space Systems Command.

Fusing together

Meanwhile, Trump Media & Technology soared almost 40% after agreeing to merge with Alphabet-backed nuclear fusion company TAE Technologies in an all-stock deal valuing the privately held company at US$6 billion.

Stock markets were perky across the Atlantic with the UK’s FTSE 100 up 0.7% after the Bank of England cut its bank rate a quarter-point to 3.75%, while Germany’s DAX 30 gained 1% and France’s CAC 40 advanced 0.8% as the European Central Bank kept its key rate at 2%, with inflation holding around the monetary authority’s medium-term target.

The kiwi dollar traded at 43.14 British pence at 7am in Auckland from 43.07 pence yesterday and rose to 49.26 euro cents from 49.04 cents.

The upbeat sentiment is set to carry through to the antipodes, with futures pointing to a 0.9% gain for the ASX200 when trading opens across the Tasman while the kiwi dollar traded at 57.73 US cents from 57.57 cents yesterday.

Local data include Stats NZ’s November merchandise trade figures and ANZ’s separate business and consumer confidence surveys.

And Bremworth’s 121% surge on the NZX this year will come into view after the Commerce Commission pushed out the timeframe to make a decision on rival Godfrey Hirst’s parent buying the carpetmaker’s assets, with a statement of issues about the potential deal.

Reporting by Paul McBeth. Image from Markus Spiske on Unsplash.