US inflation expectations boost stocks ahead of data

investmentnews.com:

The dollar weakened, stocks rose and Treasury yields dipped on expectations slowing U.S. inflation will erode the case for more rate hikes.

A gauge of the greenback dropped to the lowest since April as traders focus on U.S. consumer price data due later Wednesday, with a Bloomberg survey showing expectations for both core and headline inflation continuing to moderate in the face of the Federal Reserve’s monetary policy onslaught.

The Stoxx Europe 600 index advanced for a fourth day. Nordic Semiconductor ASA jumped more than 5% after an earnings beat, leading the tech sector higher. Bank shares outperformed, with Virgin Money UK Plc surging as much as 6.5% after the UK’s eight largest lenders all passed the Bank of England’s latest stress test. Travel and leisure shares fell, led by Air France-KLM and IAG after Deutsche Bank cut its recommendations on the stocks.

Futures on the S&P 500 and Nasdaq 100 edged higher after Tuesday’s solid gains.

A trend of slowing inflation in the U.S. could be pivotal for policymakers in the months ahead, according to Bloomberg Economics. Officials have warned in recent weeks that higher rates will be needed to ensure price growth slows to the Fed’s 2% target, and a 25-basis-point increase is all but penciled for July 26 after the pause in June. The policy path after that remains an open question.

“Both U.S. and European equity markets have decoupled from the inflation narrative in recent months and this makes sense given the well-behaved decline in US inflation, which should continue with the June release today,” said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital. “However, an upside surprise in core inflation could catch investors off guard and lead to