Wall Street and European equities ticked higher on Wednesday as investors considered mixed reports on how large businesses were managing inflationary pressures.
The S&P 500 rose 0.4 per cent, notching its sixth straight day of gains and marking its longest run of consecutive daily increases since the end of June.
The blue-chip index traded just below its all-time closing high of early September, despite a choppy few weeks of trading before earnings season started.
The technology-focused Nasdaq Composite gyrated, ending the day slightly lower after giving up early morning gains. In Europe, the regional Stoxx 600 index closed up 0.3 per cent, taking its gain in October so far to above 3 per cent, thanks to optimism about the quarterly earnings season.
The moves came after the consumer goods group Nestlé lifted its full-year earnings guidance as it raised product prices to counteract increasing input costs. The consumer goods bellwether Procter & Gamble on Tuesday also said it would lift prices and maintained its full-year earnings outlook.
The Dutch paintmaker Akzo Nobel reported weaker-than-expected quarterly results on Wednesday, however, citing raw material price inflation and supply chain disruptions. Headline consumer price inflation in the US has exceeded 5 per cent for four months and hit a 29-year high in Germany.
“Right now we seem to have enough earnings power on equity markets to offset macroeconomic headwinds,” said Marija Veitmane, senior strategist at State Street. “But while some companies have shown they are currently able to pass higher costs on to the consumer and maintain margins, it is too early to tell if this will be a long-term trend.”
The yield on the benchmark US Treasury note, which moves inversely to its price, rose 0.01 percentage points to 1.64 per cent, its highest point since May.
Half the Federal Reserve’s policymakers expect to raise US interest rates from their current record low next year but the world’s most influential central bank still describes inflationary pressures as transitory.
“Markets are in agreement with central banks that inflation is temporary and will not be persisting into 2023. Only when it changes will the expectations about central banks [and their monetary policy] shift materially.”
In Asia, Hong Kong’s Hang Seng index rose 1.4 per cent while Tokyo’s Topix ended the day roughly where it started.
In currencies, sterling strengthened 0.2 per cent to $1.38 against the dollar, after data showed annual UK consumer price inflation declined slightly to 3.1 per cent in September. The UK currency jumped 0.5 per cent against its US counterpart on Tuesday as traders bet on the Bank of England raising interest rates.
“The Bank of England will need to hike interest rates in December and likely also in February to rein in inflation fears,” Liberum strategists Joachim Klement and Susana Cruz commented in a note to clients after the inflation data were released, noting that Wednesday’s report showed “continued elevated inflation pressures in the UK”.
The dollar index, which measures the US currency against six others, eased in afternoon trading, moving 0.2 per cent lower.
Brent crude, the oil benchmark, settled up 0.9 per cent to $85.82.
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