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Global shares rise, dollar retreats on U.S. inflation data

inflation data

The MSCI All-World share index traded at a record high, up 0.15% on the day, which brought gains for 2024 so far to 8.3%

Global shares rose while the dollar pulled back on Wednesday, after a hot reading of U.S. wholesale inflation set a nervous tone for trading ahead of the consumer price report that could prove decisive in when the Fed cuts interest rates.

The frenzy in so-called meme stocks entered a third day, with shares in AMC and GameStop surging by more than 25% in premarket trading.

The MSCI All-World share index traded at a record high, up 0.15% on the day, which brought gains for 2024 so far to 8.3%.

Price action was more subdued as investors were disinclined to push any market too aggressively one way or another ahead of the monthly U.S. CPI later in the day.

In European trading, the STOXX gained 0.3%, buoyed largely by healthcare shares, while U.S. stock futures were broadly flat on the day, suggesting a more muted start on Wall Street, where activity the previous day centred on the meme-stock rally.

The boom has drawn parallels with the meme-stock craze that gripped markets in early 2021, where retail traders, using trading platforms and social media investment advice pumped up the value of stocks that many big investors had bet heavily against.

I wonder whether this is a bit of speculative excess and reality will eventually kick in perhaps with CPI today, according to Pepperstone strategist Michael Brown.

The bar is very high for the market to dramatically reprice in a hawkish direction, he said, referring to the chances of an increase in U.S. rates this year.

Investors do not anticipate any rate hikes in 2024, but they have had to pare back their expectations for rate cuts, given how sticky inflation is. They currently price in 43 bps in cuts by December, compared with 150 bps in cuts expected at the start of 2024.

Data overnight showed U.S. producer prices rose more than expected in April, indicating that inflation remained stubbornly high early in the second quarter.

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